Crisis is not yet behind us, Steinitz warns

"The crucial challenge of the Israeli economy is to maintain and prevent great losses in exports," says Steinitz.

Yuval Steinitz 88 248 (photo credit: Ariel Jerozolimski)
Yuval Steinitz 88 248
(photo credit: Ariel Jerozolimski)
Early signs of "euphoria" over the beginning of a recovery in the real economy are premature and dangerous, Finance Minister Yuval Steinitz said Wednesday. "In the media, I am reading about signs of positive indicators in the economy. This kind of euphoria is dangerous, and it is too early, since we are in the midst of a deep crisis and there is still a long way until we see the end of the crisis," he said Wednesday in Eilat at the Caesarea Economic Forum, sponsored by the Israel Democracy Institute. "Economic indicators of the past months do not point to an end of the economic crisis, while signs of a recovery of the stock market are not an indicator for recovery in the real economy." Steinitz cited negative-growth data in the economy, which contracted by an annualized 3.9 percent in the first quarter of the year, and the sharp drop in exports, which fell close to 25%. "The Israeli public and the economic media understand the uniqueness of this crisis compared to previous crises experienced in the past," he said, "while among government representatives and Knesset members there is a certain feeling of indifference and ignorance to the set of priorities needed during a crisis. Everything is important - health, education, the periphery; but today, the priority has to be the economy. There is a real threat to the world economy, and if we are not careful, it could hit us, too." Nevertheless, Steinitz said there was room for "cautious optimism" regarding the economy. He said recent votes of confidence in the local economy, such as the upgrading of the Tel Aviv Stock Exchange to developed status at MSCI Inc. at a time of great uncertainty around the world, was a sign of the country's resilient and persevering economy and its international recognition. Steinitz emphasized that the central question facing the Israeli economy was two-fold: not only how to best cope with the repercussions of the crisis, but more importantly, how to maintain and strengthen its relative advantage. "The crucial challenge of the Israeli economy is to maintain and prevent great losses in exports, which make of 45% of our growth, in particular in the area of hi-tech," he said. "We export knowledge, and any losses cannot be offset by trying to boost the domestic market, as is the case in other countries, since we don't produce consumer goods. Therefore, the economic efficiency plan focuses on measures to help exporters, such as easing insurance conditions for export risk and maintaining a reasonable shekel-dollar exchange rate." Meanwhile, David Artzi, chairman of the Israel Export Institute, on Wednesday urged Bank of Israel Governor Stanley Fischer and Steinitz to take immediate steps to halt the continued depreciation of the shekel-dollar exchange rate, which dropped below NIS 3.9 on Wednesday, to NIS 3.85, from NIS 3.93 on Tuesday. "Israeli exports are in danger," he said. "I call upon the governor to increase the amount of daily dollar purchases so that we don't fall back into last year's scenario, when the shekel-dollar exchange rate dropped to a low of NIS 3.2. I urge the finance minister to activate measures that have not yet been used to halt the sharp drop of the dollar against the shekel."