Israel Matzav

Economic recovery: Israel's economy expands in the second quarter

Israel's economy grew by 1% in the second quarter of 2009, surprising many analysts.

The economy shrank 3.2 percent in the previous quarter, the Jerusalem-based Central Bureau of Statistics reported on its Web site today, revising a previously reported 3.7 percent contraction.

“I wasn’t expecting to see a turnaround so soon,” Vered Dar, chief economist at Psagot Investment House, said before the release. “This puts our recovery ahead of most of the world.”

Bank of Israel Governor Stanley Fischer has pushed the key interest rate to a record low of 0.5 percent and purchased foreign currency and government bonds to bolster the economy to curb the impact of the global recession. He has already begun to reverse the monetary easing, announcing on July 27 that he would halt bond purchases and on Aug. 10 that he would end set purchases of foreign currency.

The Bank of Israel predicted that gross domestic product will shrink 1.5 percent this year, the biggest annual drop in Israel’s 61-year history.

Fischer is likely to leave the benchmark interest rate unchanged on Aug. 24, according to four of six economists surveyed by Bloomberg. The other two forecast an increase to 0.75 percent.

Exports, which account for about 45 percent of GDP, increased an annualized 5.8 percent in the second quarter, the bureau said.

Prime Minister Benjamin Netanyahu, who entered office on March 31, pushed a two-year budget through parliament last month that includes spending to spur growth and help companies hurt by the credit crunch. Israel’s TA-25 Index, a benchmark of Tel Aviv’s biggest stocks, has surged by some 46 percent in 2009.

I find this hard to believe. There were plenty of high tech layoffs in the second quarter, and while the stock market may be trading high, if your company isn't public yet it's still quite difficult to get funded.

But I'll be happy to try to help you for a fee :-)

posted by Carl in Jerusalem @ 4:22 PM