UBS has raised its growth forecast for Israel to 3.5% from 3% in 2010, above the market consensus of 3.3%, as the bank's lead economic indicators for Israel rose strongly in February, suggesting that recovery is well underway. It also reiterated its 3.8% GDP growth forecast for 2011. The lead economic indicators are well above their long-term average.
"The big picture remains that thanks to its second macroeconomic and structural fundamentals, the Israeli economy appears well positioned to recover from the global crisis and return to respectable growth rates earlier than many other EMEA economies," says UBS analyst Reinhard Cluse.
UBS predicts that the shekel-dollar exchange rate will be NIS 3.65/$ at the end of 2010 and NIS 3.55/$ at the end of 2011.
In a new review of Europe, the Middle East, and Africa, UBS is upbeat on first quarter growth in the EMEA, but warns investors not to get carried away. Quarterly growth rates compared with last year's figures, and are likely to slow in the second half.
UBS says that its lead economic indicators, which give a three-month lead time vis-à-vis economic activity, indicate that Israel's economic growth will continue into the second quarter. It notes that fourth quarter 2009 real GDP was up 4.9% compared with the third quarter and 1.7% higher compared with the corresponding quarter of 2008. Growth was supported by private and public consumption and by exports.
UBS cautions of continued weakness in fixed investment, which was down in the fourth quarter, compared with both the preceding and corresponding quarters, but says "overall, the encouraging signs clearly dominated."
Published by Globes [online], Israel business news - www.globes-online.com - on April 15, 2010
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