Fischer: Israel can get through crisis at low cost

Stanley Fischer told the "Globes" Israel Business Conference: The economy must be managed responsibly and cautiously.

"We're in a slowdown. Europe would consider our growth rate to be impressive, but we're not impressed, Governor of the Bank of Israel Prof. Stanley Fischer told the "Globes" Israel Business Conference today. He said that the Bank of Israel would soon cut its 2012 growth forecast from the current 3.2% to around the OECD prediction of 2.9%.

Fischer added that while Israel's unemployment rate continued to fall despite the slowing growth rate, he implied that it has begun climbing again. "The unemployment rate is a variable that lags economic activity, so we must not say that the current unemployment rate is 5.6% and all is well."

Fischer said that the robustness of the Israeli economy caused people to say that there was a bubble, "not in the sense of a real estate bubble, but in the sense of an isolated island."

Fischer said that the government's response to the social protest in the form of the Trajtenberg report was "fair and responsible", adding, "The Trajtenberg report offers a responsible response and it should be implemented. The report undertakes to keep the budget framework. It's very easy to be profligate without saying how we will pay for it, but they undertook to explain how the government will finance the social proposals."

Fischer said that Israel was in "relatively good" shape and that the economy has a "sufficient margin to apply an expansionary monetary policy and cautious fiscal policy." In other words, he hinted of more interest rate cuts and called for the government not to increase the deficit.

"There are other measures that can be taken if necessary, but their time has not arrived. If we manage the economy responsibly and cautiously, we can get through this crisis too at fairly low cost, which is what I hope we will do. If we do it, we can continue to grow at a fairly rapid rate and emerge and deal with any problem that comes to Israel's shores from overseas," Fischer concluded.

Published by Globes [online], Israel business news - www.globes-online.com - on December 12, 2011

© Copyright of Globes Publisher Itonut (1983) Ltd. 2011

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