Fischer: Global economy will be weak through 2014

Governor of the Bank of Israel Stanley Fischer said he sees global growth forecasts being lowered after the Italian election results.

Governor of the Bank of Israel Prof. Stanley Fischer said in a lecture at the Kiryat Ono Academic College that he sees the global economy remaining weak until at least 2014. He said, "The world economy grew in 2012 at a rate very close to what is considered a global recession - 3%, when growth was 3.2%. Expectations for 2013 are for growth of 3.5% and after the Italian election results maybe they'll lower that a bit. In the US growth of 2% is expected. For Israel growth in world trade is important. Before the major crisis we thought of 7% average growth. In 2012 growth was less than 3% and we won't get anywhere near 7% even in 2014 according to the forecasts. In other words the world economy is weak."

He added, "In Israel we had eight good years from 2003 with average growth of about 5% despite the world crisis. We are a relatively rich economy with a high level of income. We expect 3.8% growth in 2013 and an important part of this includes the start of natural gas production, which will start flowing from the Tamar drilling and that will add 1% to the GDP in 2013."

Fischer said, "The level of unemployment in Israel has continued to fall for some years and is considered low even compared with successful countries like Finland. Overall our economy is very successful. The current macroeconomic situation is very good except for one thing and that is the budget."

Reiterating the concern about the budget deficit he has been expressing in recent months Fischer added, "We are far from the path that we hoped to reach. The main reason responsible for the deficit is that the economy grew more slowly than expected. The finance ministry's forecast for tax collection at the beginning of 2011 was very optimistic. So for the first time in many years the government spent more money than it had originally planned."

He said, "Even if the government succeeds in lowering expenditure that it is already committed to by 5%, there would still have been a 5% rise in spending. The government will need to increase taxes by about NIS 6 billion."

Published by Globes [online], Israel business news - www.globes-online.com - on February 27, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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