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Fewer businesses at risk but weakening dollar threatens future

The monthly report put the November risk index at 5.75, a drop from October's 5.78 and November 2005's 6.01.

December 20, 2006 07:17
1 minute read.
biz closing 88 298

biz closing 88 298. (photo credit: Ariel Jerozolimski)

Over 800 companies are in the clear this month, pointing to an overall declining risk for business failure and a growing economy, according to the Business Data Israel (BDI) risk index for November 2006. The firm warned, however, that a continued fall in the US dollar could have a negative impact on companies in the future. "In a few months time, more companies will move back into the risk arena if the dollar continues to weaken," BDI co-CEO Eyal Yanai told The Jerusalem Post. The monthly report put the November risk index at 5.75, a drop from October's 5.78 and November 2005's 6.01. Yanai said the results of the report were surprising given certain events that were expected to negatively impact the economy but ultimately failed to do so. Israel's war with Lebanon this summer has not had the long-term damaging effect on the economy that analysts had feared, but rather affected only a small portion of industry in the North. As a result, the risk factor for the industrial sector was unchanged from October, while the construction, services and marketing sectors all improved, according to the report. In addition, the new regulations by the Bank of Israel regarding the overdraft policy, which went into effect at the beginning of July, did not interfere with businesses' ability to operate. "We expected the new policies to cause problems for small and mid-size companies, but quite surprisingly, they didn't," Yanai said. Meanwhile, he attributed the low-risk factor in other sectors to increased foreign investments in real estate and infrastructure and also the strong purchasing power of consumers as a result of improved income. Yet, despite the strength of the economy and the relative optimism of investors, Yanai stressed that the risk factor index was not influenced by events from month-to-month and cautioned that any change in investor behavior would be reflected in risk assessments down the road. The weaker dollar could eventually hurt exporters, he said, even though it benefits importers, which comprise a larger percentage of the economy.

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