Weak dollar costs exporters $1.4b

Since January 2006, the shekel has appreciated about 14% against the US currency.

shekel 88 (photo credit: )
shekel 88
(photo credit: )
The continued weakness of the US dollar over recent months is severely slowing export growth, challenging the country's competitive position in the world, the Manufacturers Association of Israel and the Israel Export Institute warned on Sunday. "The fall of the US dollar is expected to cost exporters $1.4 billion from lost orders this year, or about 4 percent of the total anticipated, and in turn halt the recruitment of 15,000 new employees to work in the industry," said Shraga Brosh, president of the Manufacturers Association ahead of this week's Prime Minister's Conference for Export and International Cooperation. "The dollar has lost more against the shekel than many other currencies, slowing export growth to between 9% and 10% from 12% in 2006. Without government assistance industry exports will further slow down in 2008 and grow only by 6% to 7% in real terms instead of the required 15%." Since January 2006, the shekel has appreciated about 14% against the US currency. Brosh urged the government to enforce a strategic program with the target of increasing exports to account for 80% of the country's gross domestic product compared with the current 45%. "In order to reach this target, exports need to grow at an average of 15% annually in real terms, which in turn would secure GDP growth of between 5% and 6% and within six years we could close the gap between Israel's per capita GDP and the OECD countries," said Brosh. The IEI, meanwhile, expects exports of goods and services in 2007 to grow by 9% to $69b. from NIS 63b. in 2006. "The growth rate is still very low when compared to other countries where exporters have also been suffering from continuous exchange rate fluctuations as, for example, in the US and Italy, where exports are expected to grow in 2007 by 12% and 14%, respectively," said IEI Chairman David Artzi, at the Tel Aviv press conference. Artzi said the "real" victims of the exporters crisis were the small- and medium-sized companies that lack the financial means and expertise to insure or hedge against exchange rate risks. According to research provided by the IEI for the years 2004 and 2006, some 367 small exporters had to stop their export activities, while another 366 small exporters saw volume shrink by more than 70%. Artzi called upon the government to implement the set of recommendations put forward by the "Artzi Committee" a couple of months ago regarding measures tailored to assist in particular small- and medium-sized manufacturers who were suffering from the shekel-dollar exchange rate. The assistance program, which is budgeted to cost the government NIS 460 million, includes a NIS 200m. emergency fund to assist small- and medium-sized companies, advisory services on how to insure against currency risk, a non-governmental fund for currency hedging and doubling credit lines for exports to high-risk markets.