Bank of Israel Governor Stanley Fischer called a rare press conference on Monday, apparently designed to inspire optimism and to show support for the Finance Ministry's economic stimulus plan.
"I have a feeling that we are on our way out of the financial crisis. We have moved into positive ground. There are ups and downs, but the overall is positive. This is a gut feeling, not a fact," Bank of Israel Governor Stanley Fischer told a press conference in Jerusalem on Monday.
Unlike his predecessors, Fischer rarely holds press conferences. Yet he met with the press at his office on Monday to speak about the state of the economy, and also, about the Finance Ministry's plan to spread a safety net for retirement savings.
The Bank of Israel, he says, supports the ministry's plan, which "offers a low-cost solution for the relevant savers."
The plan focuses on people expecting to retire shortly, whose savings have been diminished because of the tumbles on the capital market.
One of the advantages of the plan is that it is low-cost, the governor said. The greatest risk to the plan, he added, is a rush to be overly generous. If the government falls into that trap, to paraphrase his words - "We and future generations will have to pay the price."
Declining to comment on the recent crisis between the Prime Minister's office and the treasury, Fischer said that the parties are close to reaching a mutually agreed upon plan.
Fischer added that the differences between the parties were, in fact, minor and the overall attitude similar - and the Prime Minister's plan was more apt in a number of clauses. "A safety net defined by a low cost will boost public trust and improve Israel's financial stability," Fischer said.
The global economy, Fischer noted, is undergoing a difficult period and Israel, as a small and an open market, is affected by the recession and slowdown that developed economies are undergoing. Exports are falling, especially high-tech exports. Non-finance investments are shrinking, and the budget deficit is growing. Data from the Central Bureau of Statistics for the third quarter of 2008 points to a sharp drop in growth, to 2.3%.
Fischer added that the condition of the Israeli banking system is far better than that of other developed economies. At 11.5%, the capital adequacy of Israel's banks is high, despite their losses in recent months. Fischer predicts that the 2009 budget deficit will increase to 3% of the gross national product. Israel, unlike the U.S., does not have the flexibility that the U.S. does to increase the deficit any further (the U.S. is expected to reach a budget deficit of 7% of the gross national product in 2009). On the other hand, appropriate economic policy in 2009 will enable the country to return to 5% economic growth rates in the years that follow. "This economy," Fischer said, "has a future."
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