Israel’s exports are in bad shape, according to statistics published over the weekend, but exporters are full of optimism due to the shekel losing ground against the dollar.
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After trading around 3.47 shekels from July to mid-August, the dollar recently jumped to 3.6 shekels. This is still relatively low as far as exporters are concerned, but many believe the outlook is good.
This kind of optimism hasn’t been voiced in two years.
“Declining exports? I’m looking at the dollar, which jumped hysterically this past week, and I’m satisfied,” said Sam Donnerstein, the owner of door and lock company Rav Bariach (RB-Doors). His exports haven’t dropped except for the period during Operation Protective Edge this summer, at which point the company had trouble getting its wares out of the country, he said.
Central Bureau of Statistics data shows that exports of goods were down 14.2% in annualized terms for July and August, and 13% in annualized terms for March through May. High-tech exports, which account for 42% of industrial exports, were down 16.4% in annualized terms for July and August, versus 17% in annualized terms for March through May.
The statistics bureau credits most of the decline to the state of the economy in Europe and the United States, which are Israel’s two main export markets.
However, the Israel Export Institute believes that the dollar-shekel exchange rate is actually the main factor in Israel’s declining exports. A weaker shekel means Israeli products are cheaper and more competitive in international terms.
Shauli Katznelson, VP-economics at the Export Institute, notes that once you take Teva Pharmaceuticals and Intel – two major exporters subject to significant fluctuations – out of the picture, a clear trend can be observed. Teva’s exports fell last fall before spiking at the end of the year, while Intel Israel’s exports are determined by demand from the global parent company, he noted.
Not including medicines and electronic components, Israeli exports have been on a slow and steady decline for the past two years, although that decline is starting to moderate, said Katznelson.
“We’re back where we were as of the beginning of 2011, after which there was moderate growth through mid-2012, at which point the trend reversed course,” he said.
Katznelson believes the primary cause behind the decline in exports is the strong shekel. The poor state of the U.S. and European economies is secondary, he says.
“However, I’m more optimistic now than I was six months ago,” he says. That’s because exporters believe the dollar is finally strengthening against the shekel, and that this trend is going to be a lasting one.
The dollar shot up against the shekel after the Bank of Israel announced in late August that September interest rates would be cut to an all-time low of 0.25%.