Israeli participants at the IMF Semiannual Meeting in Istanbul detect a distinct change in Israel's status. More and more people are interested in the Israeli economy, which is seen as relatively strong, and some are asking how this has come about. This is perhaps flattering, but there are those who would prefer that the Israeli economy retained its anonymity.
Bank Hapoalim (LSE: 80OA; TASE: POLI) today held an event for banks from various countries, as it has done in the past. But this time the response to invitations was above expectations, and the presence of several dozen banks, some of them important banks including financial institutions from countries without diplomatic relations with Israel, testifies to a new trend.
Personnel from the Bank of Israel also report being asked many questions by those who are interested in the secret of Israel's success. Bank of Israel Governor Prof. Stanley Fischer addressed the meeting about developments in Israel during a session devoted to future fiscal policies in various countries.
He recounted how the resignation of the Israeli government in August 2008, without an approved budget for 2009, did not allow a fiscal deterioration, in contrast to many other countries. The budget was eventually approved in July 2009, without any special clauses, except for some steps to facilitate raising credit in the business sector. While the budgetary deficit did rise, as a result of the expected fall in tax collection, this served to automatically stabilize the economy.
The message from the Bank of Israel to those interested in Israel was similar to the message given by Fischer in an interview given by the Governor before he left for Istanbul; countries that went into the global crisis in relatively strong shape were damaged less by the recession. The situation of Israel's banks and the fact that there was no fiscal expansion enabled the renewal of growth in Israel by the second quarter of 2009.
However, despite the interest, Israel is still a small economy, which is on the margin of global matters. As every year, Israel is included in the global forecast of the IMF but not in the forecasts of the various regions. World bankers are still much more interested in large economies like Brazil and India.
Some welcome this situation, which enables Israel's economy to remain "under the radar." In the background, there is talk about a new balance in the global economy with demands directed at China to allow a rapid and major strengthening of the Chinese currency. There could follow a demand for all countries with a current account surplus to increase expenditure and an appreciation of their currency in order to be part of this new global balance. In this matter too, the small size of the Israeli economy has enabled it to remain outside of the debate and thus able to implement its own policies in all matters related to coping with the economic crisis.
Published by Globes [online], Israel business news - www.globes-online.com - on October 4, 2009
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