As BOI awaits new governor, strong shekel curbs exports

In the second quarter of 2013, 35% of exporters reported a reduction in export shipments, while only 27% reported an increase.

Money cash Shekels currency 521 (photo credit: Reuters)
Money cash Shekels currency 521
(photo credit: Reuters)
The 11 percent rise in the shekel’s value over the past year has eroded exports, Israel Manufacturers Association president Zvi Oren said Tuesday.
The Finance Ministry reported a 3.2% drop in exports in June, while the IMA said 35% of exporters reported a reduction in export shipments in the second quarter of 2013, while only 27% reported an increase.
“The meaning of this is the loss of production and the loss of 4,000 jobs in production,” Oren said. He blamed the trend on the Bank of Israel slowing down its intervention in the foreign-exchange market since the departure of governor Stanley Fischer in June.
While the bank bought $1.44 billion in June to help keep the shekel’s exchange rate from dropping too low, in July it only bought $255 million in foreign reserves, less than a fifth.
Over the past 10 days, the shekel hovered near a two-year low, dropping as far as 3.53 to the dollar. A stronger shekel makes Israeli products relatively more expensive for purchasers abroad.
Though Prime Minister Binyamin Netanyahu and Finance Minister Yair Lapid tried twice to find Fischer’s replacement, the first two nominees they chose, Jacob Frenkel and Leo Leiderman, withdrew their nominations under intense public scrutiny.
Several other candidates are reportedly under consideration for the position, including Argentina’s former central-bank president Mario Blejer and former Bank of Israel deputy governor Zvi Eckstein. In the meantime, Fischer’s former deputy, Karnit Flug, is serving as acting governor.
Service exports, too, while still growing, did so less steadily, according to the Federation of Israeli Chambers of Commerce. Whereas the sector grew an average of 11% over the past decade and 15% in the first five months of 2012, it only grew 2.3% in the same period this year.
“The slowdown in service exports is a direct result of a global slowdown and uncertainty in the service sector as a result of misguided macroeconomic policy,” FICC president Uriel Lynn said.
Export in the sector consist mostly of services to other businesses, such as computer services, programing, research and development, but also include services for outgoing tourists and insurance.