Like most every country in the world, Israel’s economy is threatened – but perhaps it is better protected than others, said Stanley Fischer, the governor of the Bank of Israel, at a plenary meeting on the final day of the G.A.
Israel exports 45 percent of the goods that it produces, and 15 percent of its GDP comes from sales to the United States and another 15 percent from sales to the European Union, so as global buying power decreases, Israel could be hurt, Stanley Fischer told a thousand or so lay and professional leaders of the Jewish Federation system Wednesday.
“There is no way we can be totally isolated,” Fischer said.
Israel, which between 1990 and 2005 lifted most bans it had on foreign investment in the Tel Aviv Stock Exchange, has also seen a dip in its stock market that is commensurate with dips in other markets globally, he said.
But, Israel’s economy is not over exposed to the credit crisis domestically, he said.
Its banks were not exposed to the subprime market because mortgages here generally require significant down payments and collateral. “Israeli mortgages are unadventurous,” he said.
And, between 2004 and 2006, major Israeli banks were forced to sell their pension and mutual funds, making those fund independent entities, so the banks are not fully exposed to market risk and are relatively safe.
Still, the country has cut its interest rate from 4.5 percent to 3 percent over the past four months to spur spending, and will continue to do so provided inflation does not get out offhand, Fischer said.
The Knesset, he said, is right now considering an economic stimulus package that should take hold soon.
It is time for concern, but not panic in Israel – despite what one might read in the news – he said.
“It is critical in a situation like this above all to keep perspective and keep calm,” Fischer said. “Newspapers have to be sold, so one reads every morning frightening stories. This is not the true situation. We are doing better than most economies I know.”
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