Bank of Israel: economic expansion slowed in third quarter

Bank of Israel Gov. Prof. Stanley Fischer said last week that Israel's conservative, tightly-supervised banking system has prevented the kind of collapses seen elsewhere
 
According to the Bank of Israel (BoI) quarterly companies survey published last week, business growth continued to slow down substantially in almost all sectors of the economy during the third quarter of 2008, except the transportation and communications sectors.
 
The Bank of Israel noted that "The leading index of activity in the business sector indicates, for the first time since 2004, expectations of a further slowdown in business activity." The bank added that "inflation expectations for the next 12 months fell but the forecast is still higher than the upper limit of the price-stability target range."
 
The slowdown of growth in this quarter encompassed mainly the commerce, industry and services sectors as exports and domestic sales eased significantly. Against this, activity in the transportation and communications sector continued to expand. Expansion in activity in the hotel industry moderatedthis quarter compared with the same quarter last year, but activity was still relatively high.
 
Transportation and communications companies reported a rise in activity in the third quarter thanks to sales of services to Israelis. But orders for the next quarter already indicate a slowdown in the activity growth-rate.
 
Bank of Israel Gov. Prof. Stanley Fischer said last week that Israel's conservative, tightly-supervised banking system has prevented the kind of collapses seen elsewhere, while its balance of payments surplus and buoyant job market should help cushion the inevitable shock wave still to come.
 
Fischer said that the central bank expected to see Israeli economic growth slowing to 2.7% in 2009 from around 4.5% estimated for this year. Bank Hapoalim in its latest economic reportforecast growth in the local economy slowing to 1.8%, down from an estimated 4.5% in 2008 as exports and consumer spending are expected to contract amid the global economic crisis.
 
Bank Hapoalim economists foresee a significant downturn in the current quarter and in the first quarter of 2009 as consumer spending eases. Inflation is expected to moderate to 2.2%, moving back into the government's price target range of 1% to 3%.