"There is extreme uncertainty and the tidal wave will probably hit us and cause a slowdown," said Ministry of Finance director general Yarom Ariav at the Israel Democracy Institute 16th Annual Caesarea Conference in Eilat.
Ariav added, "The decision to integrate into the global economy has greatly limited options for the Israeli economy. 10% annual growth by emerging markets affects raw materials, oil, and disposable goods.
"There is no doubt that the world is out of balance. There are long-term processes underway and you have to know how this affects the distribution of financial wealth. As for the domestic economy, it's important to keep the sense of 'adult responsibility'. We're seeing signs of inflation that are not only imported, but are also caused by domestic demand."
Ariav added, "The financial market does not include Israel in the first circle because we're not really a global economy."
Mizrahi Tefahot Bank CEO Eli Yones disagrees. He said that Israel was not exploiting the new economic circumstances. "The Ariav committee, which is seeking to integrate Israeli into the global world, has presented discouraging conclusions."
Prof. Omar Moav of the Hebrew University of Jerusalem's Department of Economics noted that anyone who thought that an interest rate cut was not tantamount to the printing of money was mistaken. As for the shekel-dollar exchange rate and its impact on exports, he said, "If to generate one dollar an exporter needs three shekels and government subsidies, the Israeli citizen is subsidizing the German consumer."
Published by Globes [online], Israel business news - www.globes-online.com - on July 3, 2008
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