Morgan Stanley cuts Israel growth forecast
Bank economists predict local economy will grow 3% in 2014, compared to previous forecast of 3.4%, due to shekel's appreciation. Growth forecast for 2013 raised from 3% to 3.8%
Morgan Stanley economists have raised Israel's
growth forecast for 2013 and lowered the forecast for 2014, a review released by the American bank on Tuesday reveals.
According to Tevfik Aksoy, chief emerging-markets economist at Morgan Stanley in London, Israel's growth rate will reach 3.8% in 2013, up from the previous forecast of 3%. As for next year, the bank estimates that the Israeli economy will grow at a rate of 3% compared to the previous forecast of 3.4%.
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According to the bank, the main reason for lowering next year's growth forecast has to do with the strong shekel.
“The currency has appreciated significantly and poses a risk to growth,” Aksoy said in a note to clients. “High foreign exchange reserves and a current account surplus with a fairly stable macro picture suggest that the currency will remain strong.”
On Monday, the Bank of Israel resumed its intervention in the foreign currency trading, buying more than $200 million according to estimates.
The purchases were aimed at dealing with what the bank refers to as "unexplained movements in the shekel's exchange rate."
Behind this sentence stands the resumption of the increased activity of speculators who bring huge amounts of foreign currency into Israel. They convert this money into shekels, with which they purchase risk-free bonds which carry a higher interest than the interest on the US dollar and euro, leading to an appreciation of the shekel against the foreign currencies.
