Manufacturers: Strong shekel caused $3b in losses since 2009
The shekel has gained 15% against the dollar since April 2009.
The New Israeli Shekel is starting to look like the New Hebrew Man, and not everybody is happy about it.
It was an excellent past few years for the shekel, and that hurt exports, industrialists say. The country lost $3.3 billion in exports due to the appreciation of the shekel against the dollar that started in April 2009, the Manufacturers Association of Israel said.
The shekel has gained 15% against the dollar since then.
The strong shekel had exporters wishing for the days when the exchange rate was hovering around NIS 4.2 to the dollar, as opposed to the current NIS 3.6. At first, they called on the government and the Bank of Israel to intervene. But by 2010, they understood that the most they would be getting was the Bank of Israel's dollar purchases, designed to sop up extra greenbacks and provide upped demand for the U.S. currency - without which the shekel most likely would have gained in value even more.
Manufacturers believed that the dollar purchases were designed to keep the exchange rate around NIS 3.7, but they knew that even this protection was liable to come to an end sooner or later. So they started looking for other ways to increase profitability.
The Manufacturers Association said its estimate of $3.3 billion in lost exports includes the loss of $2.3 billion in business deals abroad, or 5.5% of total exports. "The appreciation destroyed the Israeli exporters' ability to compete internationally, as well as the ability to compete locally against cheap foreign imports, and as a result Israeli companies lost a significant amount of customers and sales," said Ruby Ginel, director of the Manufacturers Association's economics division. While Israeli industry pulled out of the crisis in 2010, growth was not uniform - in fact, figures backtracked in the second half of the year.
Over the past year, various economic leaders had said the country should start looking eastward; traditionally, Israel's main export markets have been in the West, in the United States and Europe.
Manufacturers Association head Shraga Brosh said that despite this, the country should not forget its original export markets. "We believe the American economy will ultimately recover, and therefore industrialists should not abandon their American customers. However, the situation concerns us, particularly given the decrease in exports during the second half of 2010," he said, referring to the 8% real decrease in exports.
However, for the time being, growth in the markets in the West is expected to continue slowing. While the local market is predicted to expand in 2011, cheap foreign imports make tough competition, particularly due to the strong shekel and the weak dollar.
Industrial output increased 9% in 2010, and industrial exports were up 15.5%, despite the weak figures for the second half of the year. The Manufacturers Association forecasts 3.7% GDP growth for 2011; 2010 growth was 4%.
It predicts industrial growth will slow considerably, to 4%, compared to 8.7% growth in 2010. This will be driven by slowing growth in industrial exports: The group forecasts the figure for 2011 will be only 5.5%.
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