IBI: Eckstein knows Israel economy better than Blecher

IBI chief economist Rafi Gozlan: Prime Minister Benjamin Netanyahu's ignoring Karnit Flug as Bank of Israel governor is unbelievable.

"The prime minister has not given up his attempt to find a foreign appointment, and astonishingly continues to ignore deputy governor Karnit Flug, despite the price in the image to economic leadership that the appointment process is taking and the harm caused by the strengthening of the shekel," says IBI Investment House chief economist Rafi Gozlan in a review.

Elaborating on the farce in the appointment of a new governor for the Bank of Israel and the two leading candidates for the post - Prof. Mario Blejer and Prof. Zvi Eckstein - Gozlan says that Eckstein has a deeper knowledge of the Israeli economy, but that both candidates have the same world view as Stanley Fischer during his tenure at the Bank of Israel as far as monetary policy and dealing with the strengthening of the shekel were concerned.

"The foot-dragging in the appointment of a governor is working in favor of the strengthening of the shekel, because of objections against appointing Karnit Flug, who is seen as continuing Stanley Fischer's policies," says Gozlan. "Any other appointee as governor must prove his commitment to stemming the strengthening of the shekel."

Gozlan adds that there are forces strengthening the shekel caused by the current accounts surplus and net direct investment in the economy.

As for the deficit targets for 2013 and 2014, Gozlan says, "On the revenues side, the effect from the tax hikes will wane, because in terms of the austerity impact and in terms of activity before the tax hikes. In terms of expenditures, the rise in spending will probably pick up until the end of the year, but some underperformance cannot be ruled out." He predicts that the deficit will be 4.2% in 2013, below the Ministry of Finance target of 4.65%, but that the deficit will be 4% in 2014, above the ministry's target of 3%.

Published by Globes [online], Israel business news - www.globes-online.com - on August 11, 2013

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

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