Stanley Fischer 311 R.
(photo credit: REUTERS/Baz Ratner)
Bank of Israel (BoI) Governor Stanley Fischer warned on Tuesday against making
dramatic changes to economic policy, saying that the Israeli economy was in good
shape despite the worsening situation in Europe.
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“The Israeli economy is
in a relatively good position.
The situation in Europe is worse,” Fischer
said at a press conference at the Bank of Israel headquarters in
“We can overcome this period successfully if we manage the
economy in a responsible and orderly manner.”
Referring to the European
debt crisis, which has spread to Italy and now appears to be seriously
threatening the future of the entire euro zone, Fischer said it would impact
Israel just as it impacts the entire world.
But there was “one ray of
sunlight” compared to the 2007-08 global financial crisis, as this time, “it
won’t come as a surprise,” he said, if the euro zone splits and Europe’s
financial system suffers.
“We must not surrender to populism,” Fischer
continued, referring to policies at home.
“When an economist speaks of
populism, he speaks of economic steps that have broad, short-term support from
the public but which cause long-term damage.
We must not surrender to
populism because it kills economies.”
Acting responsibly means protecting
the budget framework and resisting the temptation to raise taxes in order to
cover an expected increase in the deficit, Fischer added. He downplayed the
forecasts of such an increase, saying it would not be such a negative
development as long as the government could fund it.
The Finance Ministry
said Tuesday in its monthly forecast that it was some NIS 2.6 million short of
its expected tax revenue for the year to date.
Fischer said the GDP would
grow by around 3 percent next year, adding that this had been Israel’s original
He said the government should only consider cutting expenditures
or raising taxes if it has problems funding the deficit.
The BoI governor
said the central bank still expected economic growth of 4.7% for this year, with
expectations for next year at around 3.2%. While this will mark a slowdown, he
said it still makes Israel the envy of Europe, where growth in most countries
has stalled and – in the case of Italy – begun to decline.
more slowly but we’re not going into a period of negative growth – we’re
relatively far from that,” Fischer said. “We just got used to the fact that for
a few years we had economic growth exceeding 4%.”
He did acknowledge at
least one negative indicator for the economy, namely the damage to Israel’s
trade balance caused by a gradual drop in exports since April.