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Finance Ministry Director General Yarom Ariav. (Ofer Vaknin) Last update - 10:04 16/03/2008 Treasury finally admits: Israel facing economic slowdown By Meirav Arlosoroff, TheMarker Correspondent Tags: Israel, economic slowdown  The Finance Ministry finally admitted the obvious and said Israel is facing an economic slowdown. Treasury Director General Yarom Ariav told TheMarker in an exclusive interview that a reasonable forecast for Israeli economic growth in 2008 is 3.5%. This is 15% lower than the treasury's previous estimate of 4.2%, which was used as the basis for the 2008 state budget. Nevertheless, Ariav emphasized that Israel's economic situation is still much better than that of all other Western countries, and this is only a slowdown - and not a recession. Advertisement "There is no doubt that recent events will have an effect on Israel's economy, both because of the drop in the exchange rate, and also because of the shrinking export markets," he explained. "In addition, there will be a negative effect on the economy because of the shrinkage of the public's asset portfolio as a result of the losses on the stock market, and the effect on the perception of wealth," said Ariav. Ariav said his 3.5% estimate for growth is his own personal forecast, and not an official treasury figure. The ministry will not publish a new official forecast in the near future, since it creates these forecasts only for building the budget and estimating tax revenues, he said. So far this year, tax revenues are not below forecasts, Ariav said. "Growth of only 3.5% does not need to affect government spending. The growth rate can only influence the budget deficit, but for now I do not see a negative influence on the deficit - and not on tax revenues either," said Ariav. Even if it turns out that tax revenues fall, the treasury does not plan at this stage to cut the budget, above and beyond the across-the-board NIS 1.5 billion cut already planned. "The solution is not a cut now, since the Israeli economy is continuing according to its basic script, even if at lower rates than what we have become used to over the past four years," explained Ariav. As to the credit crunch in Israel, after Bank Hapoalim's announcement last week that its subprime losses have reached half a billion dollars, Ariav said the Israeli financial system is stable. Apart from exports, the other major growth engines of the Israeli economy (private consumption, growth in disposable income and the drop in unemployment) are all positive trends and are continuing as in the past, he said. Nevertheless, Ariav did not hide his worries about the losses on the stock exchange, Hapoalim's big losses and, in particular, the sharp fall of the dollar. Ariav met with Stanley Fischer on the matter last week, and clearly hinted that interest rates should continue to drop. However, he refused to comment on the expected reduction in interest rates. He also repeated the treasury's objection to intervening in foreign currency markets, since such intervention is doomed to failure, he said. The Bank of Israel is unable to hold its own against foreign currency speculators, said Ariav. "It is impossible for a small country like ours to intervene in trading, since it is very easy to make a killing off of us," he said. However, the interview was held just minutes before the central bank intervened in the dollar market last Thursday, which reinforces the opinion that senior treasury officials did not know of Fischer's moves in advance. Nevertheless, Ariav had a surprise of his own. Despite his objections to intervening in foreign currency markets, he did say fiscal intervention was possible. He did not rule out an economic stimulus package, as in the U.S. For example, infrastructure investments, in cooperation with the private sector are a possible stimulus, he said. In addition, planned tax reductions and effects of the economic slowdown would also stimulate the economy, said Ariav. Related articles: Fischer says he'll do everything possible to prevent recession Was there a recession? Hard Look / We're in good shape. Can it last? Bookmark to del.icio.us   The Chancellor's visit Angela Merkel arrives in Israel to 'open new chapter' in bilateral ties. London paying Netanyahu says PR trip to U.K. wasn't funded by Israeli taxpayer.   1.   Question 09:57  |  sh 16/03/08   2.   Economic Slowdown 10:36  |  Steve 16/03/08   3.   are bankers financial idiots ? the answer must be yes! 11:37  |  v hardman 16/03/08   4.   Treasury finally admits the truth 12:31  |  Millicent 16/03/08   5.   #2--Steve--where do you get your facts? 12:39  |  US CITIZEN 16/03/08   6.   Not helping the dollar would be ungrateful 13:00  |  MARK KLEIN, M.D. 16/03/08   7.   3.5 percent growth.! Not bad at all. 13:18  |  Stephen. 16/03/08   8.   1&2, Let me Laugh 13:49  |  Bambuzell 16/03/08   9.   Could this be because of the US recession? 13:50  |  Sadiq M 16/03/08   10.   Answering Ignorant Steve (#2) 15:07  |  Raymond from DC 16/03/08   11.   not good 15:13  |  Joey 16/03/08   12.   Joey 15:17  |  Forgot to mention 16/03/08   13.   Leaving US Job for work in Israel / Europe 15:20  |  SB 16/03/08   14.   Globalization 16:59  |  Mark Lincoln 16/03/08   15.   Cheap prop 22:46  |  Stella 16/03/08

Today Online IAF resumes Gaza strikes, kills 3 Islamic Jihad men Responses: 160 Gideon Levy: Barak trying his best to ruin peace process Responses: 93 Netanyahu: I acted for the state, not at its expense Responses: 82 Obama asked to explain after his minister 'damns' America Responses: 125 Rosner's Domain If you marry them, you have a better chance of keeping them State Department: UN measures fuel anti-Semitism (WTR) Poll: Is the "road map" still relevant? Neocons and the cultural proclivity of Jews (WTR) General Fraser and the third whiner More Headlines 23:04 22 rightists detained after storming E. J'lem village 21:56 PA to rebuild home of W. Bank militant leader killed in IDF raid 22:13 Netanyahu: I acted for the state, not at the expense of the state 22:01 U.K. millionaire: Netanyahu's London trip was not a 'gift' 19:12 Paris fair honoring Israeli writers briefly vacated after bomb alert 23:10 Jews, Arabs, Americans join Jerusalem Palm Sunday march 23:28 Holocaust survivors march from Krakow ghetto to mark 65 years since liquidation 19:17 Merkel arrives in Israel to 'open new chapter' in bilateral ties 19:31 Fischer: Bank of Israel to avoid meddling in int'l currency market 18:52 Syrian FM: Israel gained most from Mughniyah's assassination 14:02 Report: Eichmann intervened to save 800 Jews in Berlin in WW2 18:38 Obama asked to explain after his minister 'damns' America 16:29 Cheney en route to Mideast for 9-day visit with regional leaders Previous Editions Select Day 16 mar 14 mar 13 mar 12 mar 11 mar 10 mar 09 mar 07 mar 06 mar 05 mar 04 mar 03 mar

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