Tzvi Ben Gedalyahu
The “slow growth” era in the United States wavers on the edge of a recession, but Barclay’s Bank predicts the Israel economy will grow by 2.5 percent in 2012.
By all accounts, growth in Israel is slowing down but far less than in most other countries.
Barclay’s, which last year opened its first branch in Israel, predicts that Israel is in a relatively good situation economically. “We are adopting a more constructive stance toward emerging asset markets,“ its economists wrote in the bank’s quarterly report.
With inflation well under control – barring the usual possibility of the Iranian threat causing a spike in crude oil prices – the interest rate is likely to come down half a percentage next year, according to the British-based bank.
“Take into account that these cuts might not mark the end of the easing cycle, given uncertainty about when the Israeli economy will bottom out,” Barclay’s added.
Israel’s strong position makes it easier to withstand the global slowdown, the report added. “Only one-third of its exports are to Europe with large exports to the U.S. and Asia. External debt levels are low (41% of GDP)….
“The banking system is mostly Israel-owned, foreign ownership of government debt is minimal, and government external debt is long maturity. We expect that deceleration in the global economy will lower Israeli GDP growth in 2012 to 2.5 percent from 4.8 percent in 2011.”
Looking even further in the future, Barclay’s thinks that growth will rebound to 3.3 percent in 2013, depending on the global economy.
It praised the Bank of Israel, headed by former U.S. professor and Citibank official Stanley Fischer, for cooling down the housing market. The bank also noted that this summer’s “social justice” protests have contributed to a decline in some prices, helping to keep the consumer price index under control.
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