George Papandreou 311.
(photo credit: Associated Press)
Israel’s economic growth could slow down if the debt crisis in Greece spreads to the rest of Europe, manufacturers and exporters warned Thursday.
“As a result of the crisis in Europe, the growth forecast for the economy could be affected,” Israel Manufacturers Association president Shraga Brosh said Thursday. “We need to improve the business environment in Israel by accelerating the rate of growth and employment, otherwise we could fall into the crisis in Europe.”
Global credit-rating agency Standard & Poor’s on Wednesday cut Greece’s rating three levels, equivalent to junk bonds, and lowered Portugal’s two.
The shekel-euro exchange rate could have a serious impact on Israeli exports, Israel Export Institute director Avi Hefetz said Thursday. He called upon exporters to limit dependence and exposure to European markets and shift to alternative markets, especially in Asia.
The euro continued to weaken against the shekel on Wednesday and Thursday.
“If the current economic crisis in Greece, Portugal and Spain is not dealt with properly by EU officials and other international financial bodies, it could develop and spread to a pan-European crisis, which would have significant implications for the global economy in general and for Israeli exports in particular,” Hefetz said.
Israeli exporters should examine the risks they are exposed to, the stability of their customers, limit credit provided to customers and increase risk insurance coverage on foreign-trade transactions, he said.
Israel’s trade volume with euro-zone countries was worth $29.8 billion last year, 24.7 percent less than in 2008, while exports were $12.3b. and imports $17.5b., according to the Israel Manufacturers Association.
Exports of goods to Europe, not including diamonds, account for about 29% of all exports, according to the Israel Export Institute. Exports of goods to Europe, not including diamonds, for the first three months of 2010 were 31% of total exports, down from 33% during the same period in 2009.
Israeli exports to Greece and Portugal would be less affected by the crisis because volumes of trade were relatively low, Hefetz said. Exports of goods to Greece were worth $295 million and to Portugal about $111m. last year, while exports to Spain were totaled $940m.
If the crisis spreads to large countries such as Italy and the UK,
Israel’s economy and exports would be much more affected because of the
relatively high volumes of exports, Hefetz said. Exports to Italy were
worth $1.1b. and to the UK $1.4b. last year.
industry, which is Israel’s export leader to the euro zone, would be
most vulnerable to economic developments in Europe, according to the
Israel Export Institute.
Exports of low-tech and
mixed-traditional industries to Europe are larger than to the US. These
sectors, which include agriculture, food and plastics, are
characterized by narrow profit margins and limited ability to absorb a
sharp drop in profits.
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