Governor of the Bank of Israel Prof. Stanley Fischer today presented an updated plan to aid Israel's economy, but his revised growth forecast points to an economy shrinking faster than ever in its history.
Fischer issued an updated forecast of negative growth of 1.5% in 2009. That rate is the lowest in the history of the State of Israel. The previous forecast by the Bank of Israel was for -0.2% growth.
The Bank of Israel's plan urges the growth in public sector expenditure to remain at 1.7%, which means that per capita expenditure will not change in 2009. The plan revolves around aiding investment in infrastructure.
Without other steps, the budget deficit is expected to reach NIS 35 billion, which is more than 5% of GDP.
Fischer said, "The plan is relatively modest in terms of spending. The reason for that is that we don't have too much leeway to increase government spending. Even if the government sticks to a 1.7% increase in expenditure, the deficit will be more than 5%. There isn't room for very expansionist fiscal policy".
Fischer added, "We tried to put together a plan that is focused. If someone can suggest a plan to lower the deficit without harming the economy and without increasing unemployment, we will fully support it."
Published by Globes [online], Israel business news - www.globes-online.com - on March 10, 2009
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