Steinitz: Encouraging signs, but unemployment still lurks

"It is reasonable to declare that the worst of the crisis is behind us," says Bank of Israel Governor Stanley Fischer.

Yuval Steinitz 248.88 (photo credit: )
Yuval Steinitz 248.88
(photo credit: )
Despite encouraging signs of an economic recovery, uncertainty remains, and rising unemployment is delaying an exit out of the crisis, Finance Minister Yuval Steinitz said Sunday. "Over the past couple of months we have seen growth in exports, growth in tax revenues, the composite state-of-the economy index was positive for the first time in a year and data indicates the beginning of a return to positive economic growth," he said in the cabinet meeting. "But caution is warranted," Steinitz said. "Only six months ago we were in the middle of the worst economic crisis. Local unemployment data is lower than in most western countries. But until we see a significant drop in unemployment data, we will not be able to rest on our laurels." The labor market was responding very slowly to the positive indicators in the economy, although recent data published by the Employment Service shows signs of stabilization, he said. In the Finance Ministry's quarterly economic survey, Steinitz and Yarom Ariav, the ministry's director-general, cited the leading index of economic indicators, which rose at a preliminary 1.2 percent in July, its third consecutive gain following declines since last June. Recent Central Bureau of Statistics figures show that gross domestic product rose by 1% in annual terms in the second quarter of 2009 after contracting by 3.2% in the first quarter of the year, and a recovery on local and global stock markets. "A substantial part of the positive trend can be attributed to locally produced growth, because even though exports and foreign investments have not seen a complete rebound, we are already seeing signs of renewed growth," Steinitz said. "However, the bureau's figures are based on preliminary estimates, and even if they are verified, per capita GDP growth was still negative in the second quarter. In addition, the budget deficit and government expenditure will be very high in 2009, and the debt-to-GDP ratio is also on the rise and is expected to grow to 80% by the end of the year." Industry, Trade and Labor Minister Binyamin Ben-Eliezer said Sunday that even though signs of a recovery in the local economy were appearing, the government needs to prepare for "the day after," to encourage and revive the labor market. "Recent economic data is encouraging, but we cannot draw conclusions from the data of one quarter," he said at the cabinet meeting. "We need to wait and see whether the positive trend continues." Bank of Israel Governor Stanley Fischer said Friday that despite the encouraging signs of recovery, it was too early to declare the economic crisis over. "Growth does appear to be beginning to resume. Much remains to be done, not least in bringing banking systems back to health, and there are good - though not conclusive - reasons to fear a substandard recovery," he said at an annual symposium sponsored by the US Federal Reserve Bank of Kansas City in Jackson Hole, Wyoming. "Nonetheless, it is reasonable to declare that the worst of the crisis is behind us, and that the first signs of global growth have appeared earlier than was generally expected nine months ago."