Speaking at the "Globes"-Phoenix Investment Conference today, Dr. Golan Benita, head of the Bank of Israel Markets Department, explained how the bank saw the global and local macro-economic environments.
"Between the end of 2022 and the beginning of 2023, there was broad consensus among investment houses and international bodies that in 2023 the US and Europe would undergo a substantial recession. Consequently, the assessment on the financial markets was that inflation would rapidly recede. Since then, several developments have taken place," Dr. Benita said.
"The main ones that we can all list are the opening up of the Chinese economy, the removal of Covid restrictions, a warmer than expected winter in Europe, and the very good preparations that the Europeans made to avoid an energy crisis that would have hit their economies hard. Above all, as time went by, the data indicated resilience of labor markets and of private consumption in most of the developed countries."
Benita went on to talk about the pessimistic forecasts that proved wrong. "If you look at the growth projections for 2023 by investment houses at the beginning of the year and today, you can see a significant upward revision, in the US, in Europe, and in China as well." On the policy adopted by the Bank of Israel, Benita said that, relative to other countries, it had responded very rapidly to the rise in inflation. "Within nine months of inflation rearing its head and exceeding the target range, the Bank of Israel reached a positive real interest rate."
Benita said that growth in Israel was robust, employment was at a peak, the unemployment rate was low, but that nevertheless it was possible to identify several indicators of activity moderating. Among other things, Benita mentioned the number of job vacancies, which he said was falling and approaching pre-Covid levels. On inflation, he said, "When we look at the quarterly rate, the semi-annual rate, and the seasonally adjusted rate, we see that the quarterly rate is lower than the annual rate, and so we conclude that there is a degree of moderation in the rate of inflation."
The Investment Conference is in collaboration with The Phoenix Holdings and is sponsored by Strauss Group.
Published by Globes, Israel business news - en.globes.co.il - on June 14, 2023.
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