"High tech in vulnerable in the current situation, because most exports go to the US, the heart of the crisis, which is a problem," said Bank of Israel Research Department director Dr. Karnit Flug at the Herzliya Conference today.
Flug added, "The Israeli economy is still characterized by a fairly high debt-to-GDP ratio." She said that this reduced the freedom of action and flexibility of fiscal policy.
Flug noted, however, that there were factors that enhance the economy's soundness in the crisis. "We entered the crisis with a particularly strong macroeconomic picture." She pointed to the high level of private savings, compared with the US, and said that Israeli consumers were therefore less dependent on credit to pay for private consumption. The current account surplus is an additional factor. "Economies with a current account deficit are more vulnerable in times like these," she said.
Flug presented the net balance of the business sector, including activity in the fourth quarter of 2008. "The picture is that business product probably contracted in the fourth quarter of 2008," she said.
Published by Globes [online], Israel business news - www.globes-online.com - on February 2, 2009
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