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(photo credit: Ariel Jerozolimski)
The rocket barrage on Israel's towns and communities from Haifa northwards over the past week is costing the country up to half a billion shekels a day in lost business, but economists at Dun & Bradstreet remain confident the strength of the economy is not at risk.
"On the back of Israel's economic strength and a growth rate, which is one of the highest in the western world, we don't expect the period of conflict to substantially harm annual growth rates," said Reuven Kuvent D&B Israel's general manager, commenting on the first report that examines the maximum economic repercussions of the escalations, which have led to the closure of the majority of businesses and factories in the North. "What we expect is that the period of warfare in the North will cause only slight moderation to the annual growth rate of the economy.
Similarly, Fitch Ratings, over the weekend, retained its A-minus debt rating for Israeli sovereign debt as well as its "stable outlook," while cutting Lebanon's outlook to "stable" from "positive." The ratings agency said confidence in the country would take a short-term knock from the violence but that the economic fallout would be limited by the economy's start from buoyant position and a robust policy framework.
D&B's estimate is a calculation of the maximum financial potential damage that would be caused per day if all business activity in the North were completely frozen. The report took into account the costs of the virtual standstill of almost all local business activity in the area, compensation costs paid to employers, businesses and farmers and damages caused to property. External factors disrupting business activity such as closure of or damage to the Haifa port were not considered in the calculation.
Meanwhile, the Manufacturers' Association said on Monday that limited operational activity of factories in Haifa and the North had cost the industry between NIS 300 million and NIS 400m. in financial damages since the start of the escalation July 12. According to the latest information collected by the Association's emergency headquarters in the North about 35 percent of the 1,800 factories and small manufacturing businesses in Haifa and the North were shut, about 35% were in partial operation and some 30% were working as usual.
D&B Israel pointed out that the immediate damage caused to tourism-related businesses since the uprising of violence in the northern regions primarily would affect the domestic and incoming tourism segment. According to leading travel agencies in central Israel, outgoing tourism had been virtually unaffected by recent events, as cancellations were balanced out by rescheduling of trips and raising interest in alternative destinations. D&B expects the mainly domestic tourism market in the North to recover and thrive again once the conflict abates, thanks to the short memory of the Israeli tourist and his desire to take a break, as well as to demonstrate solidarity and support for the North.
In contrast to the period of the Intifada, which took place against the background of a period of slow economic growth and global demand amid a severe recession, D&B's Kuvent explained that the present escalation started in one of the best periods ever in the history of Israel's economy.
"More than ever, we are confident that the Israeli economy will be able to better absorb the repercussions of the raging war in the North," he said.
The research group emphasized that 2005 constituted the best year ever in the history of the Israeli hi-tech industry, as the revenue of leading technology companies increased by 20 percent over 2000, the sector's previous peak year. Industrial export, which constitutes almost 40% of the total industrial product, also increased by 5.6%, after rising 17% in 2004.C
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