Continuing the development of the Tamar gas field at the current pace and especially the consequent move towards gas exports will result in the Israeli economy catching the so-called Dutch disease, according to the initial findings of new research by the University of Haifa's Natural Resources and Environmental Management Research Center.
According to the research, Israel's economy will be significantly directed towards natural gas resources at the expense of other business sector resources in competitive terms and the shekel will strengthen making it more difficult to export goods and services.
Researchers Prof. Ofira Ayalon and Idan Liebes claim that while Israel's GDP will rise by 1%, in line with the Bank of Israel's forecasts, business sector production could fall by up to 20% because the shekel will strengthen by about 3.5% against the dollar. This will harm industry and in particular exporters. "The harm to production and competitive capability around the world will hit all sectors from high-tech through traditional industries," the researchers claim. The model will be presented next week at the "Natural Gas and Israeli Society" conference being held at the University of Haifa.
In response to the research, a senior member of Israel's energy sector said, "The risk of Dutch disease is zero. Developing both the Tamar and Leviathan fields will cause a rise of just 1% in GDP. Furthermore, there are ways today to avoid Dutch disease such as for example setting up a fund for the revenues from gas sales. The fund will invest outside of Israel thus avoiding appreciation of the shekel, exactly as it happens in Norway."
Published by Globes [online], Israel business news - www.globes-online.com - on June 18, 2015
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