The Bank of Israel is expected to raise Israel's growth forecast on Sunday, sources inform "Globes." The current growth forecast for 2012 stands at 2.8% after previously being lowered from 3.2% due to what the Bank of Israel described as, "the shaky global economic conditions due to the Europe debt crisis."
The pessimism that prevailed at the Bank of Israel at the end of 2011 was reflected in its monetary policy. In the second half of 2011, the interest rate was lowered by 75 basis points from 3.25% in September 2011 to 2.5% in March 2012.
However, since then the imminent danger of a complete financial collapse in Europe has been removed after an agreement was reached regarding the repayment of the Greek debt, and after the European Central Bank made a sweeping intervention in the markets and injected cash into the banking system.
Furthermore, the US economy is showing an impressive improvement, mainly in the labor market, with the number of available jobs being surprisingly good, beating expectations over the past few months.
The data in the Israeli economy are even better (with the exception of export figures) including labor market data where unemployment continues to fall. Imports continue to reflect domestic demand, which is stronger than expected.
The most recent figures regarding industrial output and trade and service revenue are also well reflected in the Bank of Israel's State of the Economy Index, strengthening the feeling that assessments about an economic slowdown were somewhat exaggerated.
It should also be noted that forecasts for growth in the Israeli economy in 2012 by both the OECD and International Monetary Fund (IMF) are 3%. Both these organizations said in their annual reports that the rate of growth in the Israeli economy is slowing but there is no concern about a "hard landing" or recession.
Published by Globes, Israel business news - www.globes-online.com - on March 22, 2012
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