"We're not out of the recession yet, but in the process of emergence from the economic crisis. We've seen renewed growth in recent months," said Minister of Finance Yuval Steinitz at the start of today's cabinet meeting. He said that the economic plan included in the 2009-10 state budget was a factor that facilitated the economic recovery.
Steinitz and Ministry of Finance director general Yarom Ariav gave the cabinet a presentation entitled, "The Israeli economy - is this the turning point?" on the basis of the positive macroeconomic figures published in the past few weeks. They noted that this is the start of a tradition to brief the cabinet about the economy every quarter.
Steinitz said that, in the past two months, exports had grown, tax receipts increased, and that both the Consumer Confidence Index and State of the Economy Index were positive for the first time in more than year. "A significant part of the upward trend is due to Israeli sources, which can be seen in that even though exports and foreign investments have not yet fully recovered, we're already seeing signs of growth," he asserted.
Steinitz added that two domestic influences could be discerned, one real and the other psychological. "On the real side, we're talking about an expansion of public spending beginning in the second quarter, as well as help for the credit market. On the psychological side, which is no less important, we can say that the formulation of the economic plans, approval of the two-year budget and the package deal contributed to the sense of stability and lowered the level of uncertainty. These measures even won the support of international rating companies," he said.
Steinitz cautioned against premature celebrations, saying, "Caution is warranted. Just six months ago, we were in a very severe economic crisis. Although Israel's unemployment figures are lower than in many Western countries, until we see a sharp drop in unemployment, we cannot rest on our laurels. We must continue implementation of the economic plan and maintain fiscal discipline in order to truly resume growth," he said.
Ariav warned the cabinet that some uncertainly was still prevalent. The Central Bureau of Statistics' second quarter figures are still only preliminary estimates, and if verified, they still amount to a decline in GDP per capita. The budget deficit will be very large in 2009, and the debt-to-GDP ratio will rise to 80% by the end of the year. Furthermore, interest rates and taxes are likely to rise around the world in order to reduce the huge deficits created by the crisis and governments' interventions.
Published by Globes [online], Israel business news - www.globes-online.com - on August 23, 2009
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