'Economic expansion slows in Q1'

Businesses expect shekel to weaken by 5% against dollar by June.

bank of israel 88 224 (photo credit: Ariel Jerozolimski)
bank of israel 88 224
(photo credit: Ariel Jerozolimski)
Business growth slowed in all sectors of the economy during the first quarter of 2008 except the hotel industry, according to the Bank of Israel quarterly companies survey. "In the first quarter of 2008, the expansion rate of business activity slowed down. Except for the hotel industry, which expanded at a significant rate despite the changes in the shekel-dollar exchange rate," central bank's spokesman Yossi Saidon told The Jerusalem Post. The general slowdown was the result of a reduction in demand in the first quarter, the bank said. The report used qualitative measures to evaluate 542 companies and businesses. "Expectations for the next quarter show a partial return to the positive growth trend that marked the economy over previous quarters," according to the report. The hotels and tourism companies sector showed a sharp rise in activity during the quarter, something that is expected to continue with the renewed confidence of foreign travelers in Israel. The industrial sector showed a slowdown in growth due to weakness in exports and even more so in domestic sales. Industrial businesses said they expected this trend to continue in the second quarter albeit with some improvement over the first quarter. Businesses expect the shekel to weaken by about 5 percent against the dollar, estimating that the dollar will be worth NIS 3.66 at the end of June, compared with an average of NIS 3.46 during the surveyed period. Expectations among companies were that the dollar will cost NIS 3.93 in March 2009, from an outlook of NIS 4.18 three months ago. The participating companies forecast a level of NIS 3.66 to the dollar by the end of June, compared with NIS 4.03 in the estimate made in the previous quarter. The average inflation rate projected by the surveyed businesses for the 12 months through March 2009 is slightly down, at 2.69%, from the 2.77% predicted in the previous survey. At the same time, the percentage of the companies who expected inflation in the next 12 months to be above the government's price stability target range of 1% to 3% rose to 30%, compared with 25% who expected this in the previous quarter.