Stanley Fischer told the Finance Committee this week: we are far from recession, but the effects of the crisis in Europe will hurt Israel.
"As far as the economic situation is concerned, there is a slowdown in growth. We're growing more slowly than last year. The slowdown began in the second quarter of this year," Governor of the Bank of Israel Prof. Stanley Fischer told the Knesset Finance Committee. "The reported growth does not meet our prior estimates, but it does fit the average growth rate of the past 30 years. It is respectable growth that we should get used to." Fischer added, "We are not in a recession; we're far from that."
Fischer warned, however, "There is a very serious crisis, especially in Europe. If the Euro Bloc does not wake up, it's impossible to know what the repercussions will be, but they won't be good. We already see the effects of the crisis in Europe on Israeli exports. "A crisis in Europe will affect us, at both the financial and non-financial levels. If European banks crash, that will affect us too. The financial climate will be a lot worse, and we'll be a lot less optimistic. It could happen." Fischer said that the Bank of Israel now predicts 4.7% GDP growth in 2011 and 3.2% growth in 2012. "The Ministry of Finance's projections are too optimistic, and that's why we're missing the targets," he added.
Fischer reiterated his position enunciated at yesterday's press conference that Israel must act responsibly in view of the global economic crisis, notwithstanding the social protest. "I advise that we continue to manage the economy responsibly, and not to capitulate to populism." He advised the Finance Committee not to breach the budget framework or to raise tax rates. Fischer than changed the topic to the need to amending the Banking Law. "The system of controlling cores in Israel is not prevalent in the world. Banks are not usually controlled through a controlling core, but in Israel that is how it is."