Barclays warns Israel can't rely on exports

Analysts: Israels financial markets will continue to outperform.

"Israels technology exports, sound financial sector, and supportive economic policy have helped growth performance," state Barclays Capital analysts Daniel Hewitt and Koon Chow in their opening of a review on the Israeli economy in the bank's quarterly review of emerging markets.

The analysts add that inflation is set to fall towards the middle of the 1-3% target range, and that the Bank of Israel will continue to gradually tighten monetary policy to normalize rates, although some interest rate hikes will now probably be postponed.

Hewitt and Chow predict 3.3% GDP growth for Israeli in 2010, and a slight acceleration in 2011. They warn, however, "Reliance on net exports is no longer possible; instead, we expect imports to recover more than exports. Private consumption looks set to accelerate back to normal levels in the range of 3% per annum growth. The main growth driver, in our opinion, will be an acceleration in investments, which we expect to recover gradually to 7% growth in 2011 from -7% in 2009."

Hewitt and Chow also predict that Israels financial markets will continue to outperform.

The main vulnerability stems from geopolitical risks, though they note that the ongoing conflicts with Lebanon and Palestinians, so far, have not had a lasting detrimental impact on Israels financial markets in recent years.

Published by Globes [online], Israel business news - - on June 27, 2010

Copyright of Globes Publisher Itonut (1983) Ltd. 2010

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