‘There is a world slowdown, but we are not expecting a recession’

“The world's major economies are slowing down, but they are not expected to slide into a recession, despite the worries in the financial markets,” said David Reznik, an interest strategist at Leumi Capital Markets. Reznik, who delivered an economic analysis at this week's Jerusalem Post-Maariv Conference, warned that despite his relatively optimistic forecasts, several risk factors can create uncertainty in the financial markets. The first, he explained, is the continuing trade war between the United States and China, which he estimates presents the primary challenge to the world economy. Talks between these two powers to reach a trade agreement are expected to continue, but in the meantime, no agreement is on the horizon. “US President Donald Trump would like to reach an agreement with the Chinese before the presidential elections next year, but China does not have elections,” said Reznik. Nevertheless, he feels that Beijing has an important economic interest in reaching a trade agreement with the US. It is only natural, he explains, that China will attempt to get the best terms for itself, especially in light of the fact that it is an election year in the US and because of Trump's growing interest in reaching an agreement. The Brexit crisis is an additional risk factor for the world economy, said Reznik. “It is becoming even more complicated, and it is possible that the United Kingdom will exit the EU even without an agreement,” he speculated. Reznik advised paying attention to the currency wars between major banks, which can create uncertainty in the markets. He also said that centers of political instability, such as Hong Kong, Italy and Argentina, are not helping financial stability. Despite these risk factors, he estimated that the economies are not on the verge of a recession, as occurred in the economic crisis of 2008. “The central banks are active in preventing a slide into recession,” he explained. “The Federal Reserve in the United States is leading a policy of negative interest, which may be expanded. The interest forecasts for the end of the year are higher than what was expected at the beginning of the year. The Fed has gone to a policy of lower interest rates, and signaled this to the world.” Against the backdrop of a slowdown in the strong economies of Europe and other countries in the world, Reznik said Israel has managed to maintain a reasonable annual growth rate of 3%. Nevertheless, he warned of a slowdown in the Israeli economy when one discounts the natural gas deal. Reznik does not think that the Bank of Israel will change its policy. “There is low inflation in Israel, relative to the objective, and the shekel is strong,” he said. “The Bank of Israel may slightly reduce the interest rate, but we will not be in negative interest territory. The low interest rates in the world do not allow the Bank of Israel to raise its rates. Despite this, it will be hard for the bank to raise its rates because of the complicated situation. Even now the Bank's interest rates are close to their [historic] lowest.”

‘There is a world slowdown, but we are not expecting a recession’

Reznik, who delivered an economic analysis at this week’s Jerusalem Post-Maariv Conference, warned that despite his relatively optimistic forecasts, several risk factors can create uncertainty.

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