"The effect exerted by the factors that have stabilized the Israeli economy until now is receding, and we feel that growth in Israel over the coming quarters is likely to be zero, and perhaps even negative," write Bank Hapoalim (LSE: 80OA; TASE: POLI) analysts in their macroeconomic review for December.
"The forecasts are becoming more pessimistic with the passage of time, and the prospect of an early recovery from the recession looks increasingly unlikely," add the analysts. "The sentiment coming out of Washington now is that the new administration will invest however much is necessary to prevent a further deterioration. Policy makers are turning their attention to the slowdown in growth in emerging markets, with the adoption of a string of monetary measures and fiscal tools to halt the crisis and promote domestic demand."
Returning the Israeli economy, the Bank Hapoalim analysts say it is "still isn't in a recession on the scale of that in the US or in Europe, but the indicators point to a tangible drop in economic activity."
The analysts believe the budget deficit could easily reach 5% in 2009. They add that, viewed in the context of the crisis worldwide, a deficit of this size is not exceptional, but it does not leave the government with resources to handle a crisis in the financial markets or develop plans to foster economic growth.
The Bank Hapoalim analysts advise investors not to increase the equity component in their portfolios, even if share prices do rise in the short-term, since the risk level in the markets is still high.
Published by Globes [online], Israel business news - www.globes-online.com - on December 4, 2008
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