Governor of the Bank of Israel Prof. Stanley Fischer today said the he would continue to closely monitor the exchange rate, after buying $350-400 million dollars earlier this week to weaken the shekel. Speaking at an Israel Hotels Association conference in Tel Aviv today, Fischer added that the Bank of Israel will soon raise its 2010 growth forecast for Israel, and that the economic recovery is "V" shaped.
Fischer said that driver of the shekel appreciation is Israel's current accounts surplus since 2003. "This is a good thing, but it strengthens the shekel," he said. "As long as we are a strong economy, and so long as the world thinks this, more investors will prefer to invest in Israel. This strengthens the shekel."
Fischer added, "Our foreign currency purchases influenced the exchange rate and eased the shekel's appreciation. We undertook this policy in order to help the economy during the global recession. Nonetheless, it is clear that we cannot continue this indefinitely. We at the Bank of Israel are monitoring the situation, and we're not indifferent to the exchange rate."
Fischer also talked about Israel's unexpected recovery from the recession. According to the Central Bureau of Statistics, GDP rose by 0.5% in 2009, well above the pessimistic forecasts of the Bank of Israel at the beginning of the year, which projected an economic contraction of 1.5%. In September, the bank raised its growth forecasts for 2009 to zero, and 2.5% for 2010. This is now seen as too low.
Fischer said, "The 2010 growth forecast is 2.5%, but we'll soon revise it upwards. As for 2009, the Central Bureau of Statistics reports that fourth quarter growth was an annualized 4%."
Published by Globes [online], Israel business news - www.globes-online.com - on January 7, 2010
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