"The deficit will be very high about 5% of GDP. We don’t have a budget for 2009 and the formula of one part in 12 is a restraining influence. We have a different fiscal situation to the US," Governor of the Bank of Israel Stanley Fischer today told the Conference of Presidents of Major American Jewish Organizations in Jerusalem.
He said, "You have the right to print dollars, while we do not. You will ask this year for $1.5 trillion from the world without seeing a dramatic rise in interest rates. We do not have the possibility of asking for between10% to 12% of our GDP. We have much less room to expand fiscally."
According to figures published two weeks ago by the Bank of Israel the expected budget deficit currently stood at 4%, while a deficit of 5% amounts to about NIS 35 billion.
Fisher added that the Ministry of Finance excelled in maintaining fiscal discipline. "I hope that it will remain so. What will happen with fiscal policy depends on the next government but there is not much room for fiscal expansion."
Regarding the Bank of Israel's future plans Fischer said, "We continue lowering interest rates as far as is possible. We can go to 0% because negative interest rates are not possible. We have another plan based on buying assets, government bonds and other assets."
Asked if the Bank of Israel would purchase corporate bonds he said, "Central banks never say never."
Fischer added that the Bank of Israel would continue to buy dollars. He said, "We have not set a minimum exchange rate. That would be catastrophic."
Published by Globes [online], Israel business news - www.globes-online.com - on February 16, 2009
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