Rosh Hashanah Sees Reduced Economic Forecast at Bank of Israel
The growing economic uncertainty has forced Bank of Israel to cut back expectations for increased growth in the global scale amid the Rosh Hashanah observance.
The Bank of Israel has shown signs of diminished economic growth forecast as the Monetary Policy Report covering January to July 2011 showed a continuing uncertainty in the global economic recovery.
The report did not welcome favorably the entrance of Rosh Hashanah, the celebration of the Jewish new year that began on the sunset of Wednesday and will continue until nightfall on September 30, a period when banks and international firms are going to adjust their forecasts lower than what they initially were.
The forecasts now seem to project a higher probability of a global recession, though may not be as strong as the 2008 global financial crisis.
Meanwhile, the International Monetary Fund (IMF) said in its September outlook that the rate of growth in advanced countries since the start of 2011 has failed robust expectations.
Furthermore, the IMF added that the European Union has been threatened by the increased fiscal and financial uncertainty, especially since August, against a spate of debt problems at some of the members of the Union.
Against this backdrop, the IMF reduced to 4.0 percent its global growth forecast for each of the years 2011 and 2012, compared with its previous forecast in June 2011 of a global growth of 4.5 percent for 2012.
Meanwhile, the GDP growth is expected to settle at 4.7 percent in 2011 and 3.2 percent in 2012, which was revised a bit lower from the previous forecast of 3.9 percent based on the last Monetary Policy Report.
Reports partly blamed a sluggish growth of demand for the reduced growth rate in 2011, which is said to be close to the multi-year average.
Poor exports are leading the sluggish rate of demand growth, which in 2012 are expected to grow by only 1.7 percent, against the backdrop of forecasts of a lag in global trade and activity.
On the other hand, imports are expected to grow 3.0 percent by 2012, lower than that of the past two years.
Exports, except for diamonds and startup companies, are expected to expand 1.7 percent in 2012, compared with a 3.9 percent forecast this year and 10.6 percent in 2010, the Bank of Israel said.