"Despite the vulnerability to global deceleration of the large export sector, the contraction has been moderate and growth was already apparent in the the second quarter, on the back of a well diversified export sector and the resilient private consumption," says HSBC about Israel in the bank's "Strategy and Economics" report for October.
The bank adds, "The resilience of the economy is somewhat surprising in light of the relative importance of total exports to GDP (44%)," and said it expects modest positive growth for Israel of 0.3% in 2009. The bank attributes Israel's resilience to a "well diversified high-tech sector" and notes that military and pharmaceutical exports were unaffected by the global slowdown.
HSBC predicts that the shekel-dollar exchange rate will reach NIS 3.68/$ by the end of 2009 and NIS 3.60/$ by the end of 2010. It predicts that the shekel-euro exchange rate will reach NIS 5.45/€ by the end of 2009, and rebound to NIS 5.85/€ by the end of 2010.
HSBC also estimates that the Bank of Israel's foreign currency reserves reached $60 billion at the end of September and predicts that they will reach $65 billion by the end of 2009 and $67 billion by the end of March 2010, before declining by the end of next year.
HSBC writes that Governor of the Bank of Israel Prof. Stanley Fischer's aggressive policies of interest rate cuts and daily intervention in the foreign currency market was in part due to the lack of a fiscal stimulus, and because he expected the global deceleration to have a major impact on Israel as exports make up 44% of GDP. The bank notes that Fischer's monetary policy differ from those of his predecessors, Jacob Frenkel and David Klein, in its "emphasis on growth and employment in conjunction with inflation targeting."
Published by Globes [online], Israel business news - www.globes-online.com - on October 5, 2009
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