Appreciating shekel becomes the major deterrent for Israeli exports despite other factors. The booming exports are reeling under the pressure of rising value of its currency against all major monetary units including the euro, the dollar and the pound. The Manufacturers Association of Israel (MAI) has a premonition that this trend will snowball into lower exports and will thereby cause billions of dollars to companies’ profits.
It goes without saying that those who are employed in export oriented businesses will be the worst affected. Overall sentiment clearly indicates that if the shekel remains in current levels, it will bring unimaginable damage to the economy as a whole. That is because Israel’s economy mainly depends on export growth and the domestic market is comparatively negligible to that of its exports.
Recently, the shekel touched a 10-year high against the dollar, with the US currency briefly slipping below 3.6 New Israeli Shekels (NIS). Although the shekel has marginally come down since then, the Israeli currency is still up more than 16 per cent from the levels of July last year, when one dollar could be bought for more than 4.3 NIS.
The president of MAI, Shraga Brosh, stated that many exporters are losing international tenders and also losing a lot of money due to this. Based on the extrapolations made available by the association, the losses will be in the realm of $4.5 billion.
If one goes by the words of Yaakov Fisher, a leading business consultant, Israel is in for double-trouble with currency appreciation and slower economic growth in the US, which will spur a fall in demand. The US slow down or recession would directly impact Israel’s exports because the US is one of the largest export market of the country.
Analysts point out that shekel’s higher valuation is due to two reasons, one being the US slowdown and the other comparatively higher interest rates. The MAI has requested the Bank of Israel and the government to take lenient steps to find a viable solution to the issue. But the inflationary worries are pressing the government not to commit on anything at this juncture. Brosh further argues that growth and employment are just as important as inflation. In the current situation exporters have to fend for themselves with the usual slogan of “innovation and retrenchment”.