Exporters request gov't help over weak Euro

Man counts money near currency exchange in Kiev [file].(Photo by: REUTERS)

By NIV ELIS
03/29/2015

There are few policy tools left available to the Bank of Israel at a time when so many other countries are conducting aggressively expansionist monetary policy.

The Israel Export Institute and the Manufacturers Association of Israel are calling for government support to help exporters struggling against a weak euro.

The Bank of Israel has been buy - ing up foreign currency and set its interest rate at a record-low 0.1 per - cent for April in an effort to less - en the effects of the strengthening shekel. Although the shekel weak - ened 5% against the dollar between the last two interest-rate decisions, it strengthened 1% against the euro, according to the central bank.

That has made selling goods in Europe, Israel’s largest regional trad - ing partner, increasingly difficult.

There was an 8% drop in exports in the December-February period rel - ative to the same period the year before, which amounts to $14.3 bil - lion, the Export Institute reported.

The chemical, agriculture and phar - maceutical sectors were the hardest hit.

“I am sure that every economic pol - icy maker in the economy is aware and recognizes the importance of exports as a primary factor for con - tinued growth in the economy and will act accordingly,” Export Institute chairman Ramzi Gabai said.

There are few policy tools available to the Bank of Israel at a time when so many other countries are conducting aggressively expansionist monetary policy.

In an interview with the Associa - tion of Banks in Israel’s publication Banking , Bank of Israel Governor Kar - nit Flug said: “The exchange rate was sinking among other things because of the very expansive policy pursued in many countries, including nega - tive interest rates and quantitative easing on a large scale. This caused a reversal of the devaluation. This trend worries us, given the business sector’s need to cope with a still reces - sive global climate.”

An HSBC report last week incor - rectly predicted that the Bank of Isra - el would drop its own interest rates into negative territory and embark on quantitative easing. However, such steps are possible in the future.

Globes contributed to this report.

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