"The crisis isn't over. It's switched phases. Although a new cycle of growth has begun and in 2010 relatively fast growth rates are expected in Israel, the US, and in other parts of the world, the biggest problem is that part of this growth is through artificial respiration by governments and central banks," said Psagot Investment House Ltd. chief economist Vered Dar at the CFO Forum in Eilat today.
"There is no prior experience with the current scale of monetary and fiscal measures. During the recovery stage in ordinary business cycles, the interest rate is raised and there is fiscal narrowing, reducing the budget deficit. However, interest rates in so many countries have never been so low for so long, and so many countries have never flooded so much money and had such large debts," she said.
Dar concluded, "Strong indicators in the US, emerging markets, and in Israel only reflect the jump out of the pit, after which the economies will resume walking."
The "injuries sustained by falling into the pit" of recession will affect growth potential for the next few years. Israel, in contrast, is marked by its fairly successfully passage through the crisis, and as in 2008, the real problems this year are global and Israel is out of the picture of the crisis. "We were both lucky and smart. It's wrong to believe that without more hard work we'll have both later on."
Published by Globes [online], Israel business news - www.globes-online.com - on June 2, 2010
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