Industrial exports are expected to fall by 10 percent this year, the biggest drop since the founding of the State of Israel, as a result of the downturn in world trade, according to the Israel Manufacturers Association.
"In 2009 industrial exports are expected to decline by 10% and are forecasted to reach NIS 35 billion, the biggest ever drop," Dafna Aviram-Nitzan, head of the association's economics research division, said Sunday. "In 2010 the sharp slowdown in industrial exports is forecasted to moderate to a drop of 2.5%."
The forecast was calculated on the basis of the most recent projections of international trade in goods, she said.
"According to predictions of The Economist, global trade is expected to narrow by 3.5% in 2009, far worse than the 0.3% contraction experienced in 2001," AviramNitzan said.
"On the basis of this figure, Israeli industrial exports could be expected to fall by 16%."
But two factors would moderate this sharp fall, she said. The first is Intel's new Fab 28 in Kiryat Gat, which is expected to add $1.5b. -$2b. to annual export growth in 2009. The second factor is improved competitiveness of Israeli industry, based on the assumption that the shekel's weakness persists, and even increases, over the coming year.
This would help improve Israel's terms of trade and could offset part of the effect of the downturn global trade and improve exporters' profits, Aviram-Nitzan said.
"Taking into account the two factors, we expect industrial exports to fall by 10% in real terms," she said.
Darren Shaw, analyst at UBS investment house, expects total exports to contract by 5.9% this year after positive growth of 3.8% in 2008 and 8.5% in 2007.
"Industrial production is nose-diving, and foreign trade is slowing sharply," he said in a report Sunday. "Exports will contract by more than imports, we believe, so that net exports should deliver a slightly negative contribution to growth in 2009, following a neutral contribution in 2008."