Export Institute head calls on BoI to buy dollars

Export Institute chairman Ramzi Gabay caklled on the Bank of Israel to reactivate its past policy and buy dollars to limit serious harm to exporters.

Manufacturers and exporters are worried by the strengthening of the shekel. Israel Export and International Cooperation Institute chairman Ramzi Gabay said today that the strengthening of the shekel was jeopardizing export growth this year, and called on the Bank of Israel to reactivate its past policy and buy dollars in an effort to limit serious harm to exporters.

Gabay said, "Israeli exports are already affected by the slowdown in Europe, the weakness of the euro against the dollar, the slow recovery by the US economy, and the slow growth by Asian economies. These factors were already felt in 2012, when Israeli exports stagnated."

Gabay added that the main victims of the strengthening shekel are small and mid-sized exporters. "This sector is struggling to deal with the prolonged crisis in the global economy, which has reduced demand. The steady erosion of the exchange rate in real terms is a serious blow to their profitability."

The Export Institute today expressed deep concern that, in addition to the effect of the exchange rate on the economy, Israeli is liable to face the Dutch disease following the start of gas flows from offshore fields in the Mediterranean. "Israel's gas discoveries are a blessing for the economy, but the effect of the increase in the supply of foreign currency from lower demand for dollars and higher the supply of foreign currency from the expected natural gas receipts are liable to severely affect many export sectors," said Gabay.

Gabay said that, in order to minimize the damage to the economy from this situation, Israel should adopt the model of the Norwegian sovereign fund to invest the gas royalties overseas, as well as to reduce the budget deficit. A safety net for investment institutions operating overseas should also be established along with the possibility of lowering the tax rate on the sale of these investments, in order to boost sales of Israeli companies abroad.

Manufacturers Association of Israel president Amir Hayek also warned of the consequences of natural gas, which he called a nightmare. "Gas exports will leave us with large foreign currency reserves, creating immense pressure on the exchange rate, which is liable to greatly reduce the worthwhileness of Israeli exports," he told "Globes".

Published by Globes [online], Israel business news - www.globes-online.com - on April 3, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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