Steinitz, Brosh mull exchange-rate crisis

Industrial exports up 0.5% in second quarter.

Yuval Steinitz  88 248 (photo credit: Ariel Jerozolimski)
Yuval Steinitz 88 248
(photo credit: Ariel Jerozolimski)
Finance Minister Yuval Steinitz met with Israel Manufacturers Association President Shraga Brosh on Friday to discuss alternative ways to stem the steep fall of the shekel-dollar exchange rate that is hurting exporters. At the meeting, Steinitz said exports were a major growth catalyst poised to help the country's economy emerge out of the crisis. He said he would convene an emergency meeting at the Finance Ministry to examine alternative solutions to assist exporters and strengthen the competitiveness of the economy. "Last year's fall of the dollar has cost Israeli industry millions of shekels," Brosh said. "I am convinced that the new government and the finance minister are well aware of the repercussions of a return to the shekel-dollar exchange rate of NIS 3.5 seen last year and will do everything to strengthen Israel's exports." Last week, the shekel-dollar exchange rate slid to its lowest this year, breaking the NIS 3.80 barrier on rising expectations the Bank of Israel will halt its dollar-purchase program and will be among the first banks to hike interest rates. Since the second quarter of 2008, industrial exports have dropped by an accumulative rate of 18 percent in real terms, while during the same period the industrial sector laid off 20,000 people, 5.5% of its workforce. In a quarterly report published Sunday, figures by the Israel Manufacturers Association showed that industrial exports rose by a moderate 0.5% in real terms in the second quarter of the year, led by a sharp increase in electronics exports. "Intel Israel and exports of electrical components lifted export data, but the majority of industrial exports are still in decline," said Ruby Ginel, deputy director of the association's economics and regulation division. "In the second quarter of this year, industrial exports grew by a moderate 0.5% in real terms, to $8.4 billion, in comparison with the first quarter." Trend figures published by the Central Bureau of Statistics at the end of last month showed that exports of goods, not including diamonds, rose by an annualized 1.2% in the months April to June, after declining at an annualized rate of 23.9% in the months January to March. Ginel said the modest increase in exports in the second quarter was led the 11% rise in hi-tech exports, which was driven by a sharp jump of 66% in exports of electrical components and the start of operations of the new Intel plant in Kiryat Gat. Not including exports of the electronics-component sector, industrial exports dropped 4% in real terms in the second quarter of the year. "Despite the moderate rise in exports in the second quarter of this year, the industry has lost more than $6 billion in export volume since the beginning of the crisis in September 2008 until June 2009," Ginel said. Sector-by-sector analysis of the quarterly report showed that in the mixed-hi-tech sector, which includes, chemicals, machinery and equipment, exports plunged 5% in real terms, led by a sharp drop of 20% in real terms in the chemicals sector. From the beginning of the year, exports within the mixed-hi-tech sector fell at a accumulative rate of 25%.