The Israel Export and International Cooperation Institute warns that the US credit downgrade and the debt crisis in Europe are liable to result in a new slump in Israeli exports and a recession resulting in zero growth in 2012. Even before last Friday's downgrade of the US credit rating, the Export Institute warned a sharp drop in exports to the US and Europe next year, as well as a smaller drop in exports to Asia as the Chinese growth rate slows.
The Export Institute's optimistic scenario assumes that the current crisis does not worsen, global trade will nevertheless decline over the next two years. The weighted aggregate growth rate of imports in Israel's 12 main target markets will fall from 19% in 2011 to 5% in 2012. Export growth to emerging markets will halve from 24% in 2011 to 12% in 2012, while export growth to developed markets will plummet from 17% in 2011 to 2% in 2012.
In the Export Institute's pessimistic scenario, the current crisis will balloon from a crisis in capital markets to a global financial crisis and a crisis in the non-financial economy, which will affect global trade. Such a situation will cause Israeli exports to fall in same way as in the 2001 and 2008 crises. At the peak of the late crisis, in 2009, global trade shrank by 12% and Israel's exports contracted by 17.5%.
"Every 1% drop in global trade causes a similar drop in Israeli exports, and each 1% drop in Israeli exports results in a loss of $850 million and 8,500 local jobs," says Export Institute director Avi Hefetz.
The Export Institute adds that the vast majority of Israeli exporters have taken no preventative measures in their global operations, and have not even bothered to take out foreign trade insurance.
Published by Globes [online], Israel business news - www.globes-online.com - on August 10, 2011
© Copyright of Globes Publisher Itonut (1983) Ltd. 2011