On Tuesday, Central Bureau of Statistics published particularly alarming export data, which show an annualized 13% drop in exports in February-April 2014, after a 1.3% annualized increase in November-January. Industrial exports - Israel's growth engine - fell at the same rate.
More worrying, high-tech exports, which account for 44% of industrial exports excluding diamonds, fell by an annualized 5.4% in February-April, after rising by an annualized 15% in the three preceding months.
In seasonally-adjusted figures, high-tech exports fell 33% between February and April. Mixed-high tech exports (36% of industrial exports) fell by an annualized 18% in February-April, driven by a 26% drop in exports of chemicals and chemical products.
"This is an emergency, which requires an immediate response to stem the slide. The responsibility for dealing with the crisis is on the shoulders of the government and the Bank of Israel," said Manufacturers Association of Israel president Zvika Oren. "So long as the shekel strengthens, industrial exports will continue to fall along with the competitiveness of the Israeli economy. Manufacturing in Israel will contract, costing jobs. Since the beginning of the year, almost 800 manufacturing employee have been fired. If nothing is done to stem the slide, the crisis will only worsen."
Oren again called on the government to take urgent action to restrain the shekel through massive purchases of dollars. He said that the government and the Bank of Israel should set the shekel-dollar exchange rate at NIS 3.80/$, similar to actions taken by the Czech Republic and Switzerland.
On Monday, Bank of Israel Market Operations Department director Andrew Abir, who is responsible for dollar purchases, hinted that the central bank would not change its current policy. "What is happening in the domestic foreign exchange market is only part of the picture. The international foreign exchange market is very volatile - its fluctuations are sometimes much sharper than those of the shekel/dollar rate. A business owner needs to consider precisely what currencies are relevant to his business, and what currencies are relevant to his competitors."
Bank of Israel officials told "Globes" last week that the strong shekel was a direct consequence of the dollar's weakness on international markets, and drew attention to the dollar-euro exchange rate. They again stressed that the reference point for setting policy is not the dollar, but the real effective exchange rate (the basket of currencies of Israel's trading partners), which has not changed much since August 2013.
Published by Globes [online], Israel business news - www.globes-online.com - on May 14, 2014
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