Sources inform ''Globes'' that Israel's banks have criticized the Bank of Israel's growth forecast for 2009. They claim that the both the central bank and the Ministry of Finance do not appreciate the gravity of the slowdown the Israeli economy is facing, as a result of the global crisis in the financial and other sectors. The criticism follows the disclosure of the Bank of Israel's growth forecast, which has been revised downwards to 2.7% from 3.2%, at the 2008 International Monetary Fund Annual Meeting in Washington a few days ago.
The banks' growth forecasts currently range from 2.5%, the most optimistic prediction, to just 2%, and there are even more pessimistic projections that growth will fall below 2%. According to reports from the banks' economics departments, the crisis will impact the Israeli economy through exports, which are expected to stop growing as early as the next few months. The cause of this is the severe recession seen in the economies of the US and Europe, which constitute two thirds of the target market for Israeli products. Additionally, there is also likely to be a significant fall in private consumption, another growth engine which drove Israeli GDP up in recent years.
The marked slowdown in growth has been triggered by the global slowdown but it is also a natural process that is evolving after two years of very high consumption. As for the Ministry of Finance's current growth forecast of 3.5% for 2009, the banks say it is irrelevant. Senior Finance Ministry officials have already acknowledged this, although the ministry intends to leave it unchanged for the time being.
Published by Globes [online], Israel business news - www.globes-online.com - on October 15, 2008
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