Weak dollar will impact exports, says Trade Ministry

Among hi-tech sector companies, which usually post significant growth, a rise of only 0.5% was recorded, while low-tech manufacturers posted an export increase of 1%.

us dollar bills 88 (photo credit: )
us dollar bills 88
(photo credit: )
Although exports of Israeli products rose some five percent in the fourth quarter of 2006 to $5.14 billion despite a weakening dollar, officials in the research department of Industry, Trade and Labor Ministry said Sunday they do not expect this trend to continue if the US currency continues to hover around the four-shekel mark. "The fourth quarter of 2006 followed on the heels of significant losses from the Second Lebanon War, so comparing the rise in the fourth quarter against the third quarter might not be so accurate, but when we look at 2005's fourth quarter we can see growth of 16.3% in 2006 despite the weaker dollar," said Beni Fefferman. "However," he added, "if the dollar continues to remain weaker, the export industry won't continue to increase earnings." A weaker dollar and a stronger shekel, while it may improve the purchasing power of Israelis, is ultimately not a positive development for manufacturers, he explained, as many manufacturers have seen their production costs rise due to a rise in wage costs. And, because they are locked into long-term contracts with foreign importers, they cannot raise prices or reduce their output, something which will lead, he said, to a loss of revenue over the coming months. Fefferman's prediction is supported by data released recently released by the Manufacturers Association of Israel, which indicated that exports decreased 2.5% over the months of March and April, costing the economy some $5.3 billion. Nira Shamir, head of the Association's economic branch, noted that exports of manufactured products from Israel's technology sector, including hi-, mid- and low-tech companies, have declined markedly over the last couple of months, most glaringly in the integrated hi-tech sector, including chemical, machine, engine and electronic component manufacturers, which recorded a decrease of 6% in exports over the last two months. Meanwhile, exports from companies in the integrated low-tech sector, including manufacturers of rubber, plastic, metal and minerals, declined 0.5%. Among hi-tech sector companies, which usually post significant growth of exports from one quarter to the next, a rise of only 0.5% was recorded, while low-tech manufacturers, including textiles, furniture and paper, posted an export increase of 1%.