Monday, August 28, 2006

Israel Economic Growth Continues Unabated by the Lebanon Conflict

From an Israel Trade Commission Update, August 2006, by Nili Shalev, Israel Trade Commissioner, Canberra ....

Israel's GDP grew at an annualized rate of 5.9% in the first half of 2006, and rose 6.2% in the 2nd quarter.

Professor Stanley Fischer, Governor of the Bank of Israel....predicted that the 2006 GDP growth will reach 4%, as predicted earlier this year. ..... Capital market CPI expectations for the next 12 months, according to the Bank of Israel, are 1.8% - within the inflation range target of 1%-3%. Monetary policy has maintained its course, and the Bank of Israel interest rate is set at 5.5%, 0.25% higher than the US Fed rate, as has occurred in the last few months.

International rating agencies such as Fitch Ratings and S&P, have maintained Israel's rating and outlook.... Foreign investment houses, such as Deutsche Bank, Morgan Stanley, Citibank and Goldman Sachs suggested in their reports that the Israeli economy is robust and that it would overcome this conflict to rebound to high growth rates....

... Foreign investments have continued their inward flow during the conflict, enhancing an already record year in investments, reaching $17,188 million for the period Jan-Jul 2006, which is 11% of GDP, representing the highest rate by world standards. This partial figure expresses a 40% gain in investments over all of 2000, the last all-time record year.

....Latest R&D figures for 2005 shows Israel's civilian R&D grew, and reached 4.7% of GDP. OECD top country in 2004 was Sweden with an R&D spending of 3.8% of GDP.

The Wall Street Journal recently published a report stating that "… one critical part of Israel's economy is weathering the storm so far. The high-technology sector has continued to function, proving far more resilient than more traditional industries…"

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