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(photo credit: Ariel Jerozolimksi)
There's a "high probability" that the global market slump experienced over the recent week is not more than a correction in the wake of lofty gains, according to Bank of Israel Governor Stanley Fischer.
"There is a high probability that what the global financial markets are experiencing over the last couple of days is not more than a correction that was necessary following a period of irrational exuberance," Fischer said Tuesday night, speaking at the Academic Business Club of the Tel Aviv University.
On Wednesday the Tel Aviv stock market continued the rebound since Tuesday, which followed four days of osses amid a general slump in global markets.
Fischer explained that over the last four years growth in real terms around the world has been moving at a near unprecedented pace.
Commenting on the local economy, Fischer said Israel was strong and stable despite the political uncertainty and potential geopolitical threats.
"We are continuing to receive positive indicators one after the other and therefore we will soon be raising our GDP growth forecast of 4.6 percent for 2007," Fischer announced.
The governor pointed to the fast-growing export level over the past four years as one of the main reasons for the prosperity in the local economy.
"I would have never dreamt that I would experience the day, on which Israeli exports were higher than imports," said Fischer.
However, Fischer also pointed to three potential risks that he believes could threaten the continuing positive sentiment and fast growth of the local economy:
"A significant slowdown in the US economy, although I believe the US economy is far from a recession; continuation of strong turmoil in financial markets and future economic and social policy reforms."
From the macroeconomic side, Fischer said: "I don't see much risk, but the absence of a proper education policy is worrying me. Despite high education expenditure, efficiency and standards are low and thus significant changes need to be made."