Fischer: GDP growth may drop below 1.5%

The Bank of Israel Governor said he expected Israeli economic growth to show the "first signs" of renewed growth later this year
 
Bank of Israel Governor Stanley Fischer said last Sunday, during a lecture for students whose schools had been closed because of the fighting in the Gaza Strip, that the Bank of Israel will probably lower its 2009 economic growth estimates because of the deep global recession.
 
"The Bank of Israel's 2009 growth forecast is about 1.5%, but it is clear that we need to change this because of the situation, to correct it soon," Fischer said.
 
Fischer said he expected Israeli economic growth to show the "first signs" of renewed growth later this year. "It depends mainly on the world economy," he said. "I expect that by the end of this year the US economy will start growing, mainly because of the new Obama administration's programs about to get under way. I expect to see the first signs of growth before the end of this year."
 
The forecast given by Fischer is in line with Merrill Lynch's Israel '09 GDP estimate. Turker Hamzaoglu, Merrill Lynch's emerging markets analyst, slashed last week his real growth estimate for Israeli GDP in 2009 to zero from 1% as a result of the economic downturn in the United States.
 
"The reason for the gloom is dropping exports and private consumption" Hamzaoglu said. He also estimated that the Bank of Israel will continue to lower short-term borrowing costs this year to a rate of 1% from 1.75% currently.
 
Hamzaoglu noted that: 'The Israeli economy faces one of its most challenging periods since the 2001-2002 recession". He added 'We now expect real GDP to stay flat in 2009, the current account balance to slip into deficit and the budget deficit to widen. Hamzaoglu projects a budget deficit of 4.2% of GDP in 2009 after an estimated 1.4% deficit in 2008.