Bank of Israel revises economic growth forecast

The Bank of Israel has revised upward its growth forecast for Israel's economy in 2009 and 2010.

The Bank of Israel Governor Prof. Stanley Fischer, now expects 0% growth this year, compared with its previous forecast of -1.5%. For 2010, the forecast is now for 2.5% growth, up from 1.5% in its previous forecast.

Economists had expected an upward revision, following positive macro-economic figures released over recent months, which pointed to the economy exiting a recession. In the second quarter of this year, the economy surprisingly grew 1%.

The Bank of Israel is actually pessimistic about developments in the labor market, and raised its unemployment forecast to an average of 8.1% in 2009 from 7.7%. In other words, the central bank predicts 243,000 unemployed by year end, up from its earlier prediction, made in April, of 231,000.

The Bank of Israel stated, "The annual forecast implies a quarterly path of moderate growth of about 2.5% per quarter, annual rate, during the rest of 2009, and a slow increase in unemployment in the second half of the year."

The Bank of Israel also raised its current account surplus to $7 billion from $2 billion, "as a result of the considerable improvement in the terms of trade and the steep decline in imports."

The Bank of Israel states, "Based on National Accounts figures for the first half of 2009 and on economic indicators of the last few months, it appears that the decline in economic activity that had been expected to end only at the end of 2009 had effectively ended in the second quarter. A similar pattern also emerged in other advanced economies."

Published by Globes [online], Israel business news - www.globes-online.com - on September 1, 2009

Bank of Israel revises economic growth forecast

Expectations are now for stronger growth over the next two years.