Weak dollar costs local industry $400m.

The Manufacturers Association of Israel is calling on the Bank of Israel to drop interest rates as a counter measure to the shekel's strength.

fifty shekels 88 (photo credit: )
fifty shekels 88
(photo credit: )
Industry has already lost up to $400 million due to the depreciation of the dollar in the last three months, the Manufacturers Association of Israel said Monday, calling on the Bank of Israel to continue to drop interest rates as a counter measure to the shekel's strength. "If the dollar remains low at current levels, industry will lose income of around $2.6 billion in 2007," the Association said. "We call on Bank of Israel Governor Stanley Fischer to lower interest rates by at least 0.25 percentage points at the end of the month, in order to slow this trend and help protect the competitive ability of our exporters." Fischer lowered Israel's prime lending rate for the fourth month in a row for February, setting the rate at 4.25% for the month as the shekel remained firm against the US currency. The dollar has weakened by some 11% against the shekel in the last year. That trend continued Monday with the shekel rising to an eight-week high of NIS 4.18 per dollar in in Tel Aviv Monday, from NIS 4.2 Sunday, thus increasing concerns in industry that Fischer may keep the rate on hold in his February 26 announcement. While the Association said the hardest hit in the market were exporters, in particular in traditional industry, local sales were also hurt by the strong shekel as manufacturers faced stronger competition from importers who now had more shekels to spend on their dollar-based purchases. Manufacturers will lose approximately $970m. in local sales for the year if the current trend continues, the Association said. The heaviest losses, however, would still be shouldered by the country's exporters whose profits, it fears, will be down 5.2%, or $1.7b. short, by year-end. "While the strong shekel has played its part in the positive developments in the economy in the past year - such as the surplus in the current account, increases in foreign investments and the general growth in the economy - all that is left is to intensively work to encourage exports," the Association said. "We need to lift the obstacles slowing exporters, in particular in their financing and marketing abilities."