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Economic and Financial Review – January 2011

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Monday, January 31st, 2011

As reported by the Federation of Israeli Chambers of Commerce:

Economic growth in 2011 will be lower than the growth rate in 2010 (which has been revised to 4.5%), at and will reach 3.5%. Although this is below the growth potential of the Israeli economy, it is still impressive in comparison to most of the developed countries, also considering the fact that Israel’s largest trade partner, Europe, is undergoing a crisis.

Israel
Economic growth in 2011 will be lower than the growth rate in 2010 (which has been revised to 4.5%), at and will reach
3.5%. Although this is below the growth potential of the Israeli  economy, it is still impressive in comparison to most of the developed countries, also considering the fact that Israel’s largest trade partner, Europe, is undergoing a crisis.

Assuming housing price rises are tempered and no additional steep increase occurs in commodity prices, we expect inflation of approximately 2.5% in 2011.

Based on the expectation that interest rates of the central banks in the US and Europe will remain unchanged, and the aim of avoiding appreciation of the shekel, we estimate that rate hikes by the Bank of Israel will be moderate, to an interest rate of about 3.0% by the end of the year.

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