Governor of the Bank of Israel Prof. Stanley Fischer said today in an interview with "Reuters" that the Palestinian UN bid for statehood won't necessarily hurt the Israeli economy. "They are a small economy relative to us, they are a small economy in the region," he said a day after Palestinian President Mahmoud Abbas asked the UN to recognize a state for his people.
"They are not going to be, in that regard, important," Fischer said on the sidelines of the International Monetary Fund and World Bank annual meeting in Washington. But if the Palestinian request leads to violence or other negative political developments, Fischer said it "could be very important economically."
The Israeli economy is about 20 times larger than the Palestinians'. It is forecast to grow 4.8% in 2011 and 3.6% in 2012. Fischer voiced concern about the slowdown in the US and the debt crisis in Europe and said it will "certainly have an impact on us."
Fischer declined to comment on whether the EU crisis would influence the Bank of Israel's interest rate decision for October next Monday. But he said there was a "worsening of the mood and less optimism."
"Those parts are hard to quantify but not less important," Fischer said. "It isn't working its way through numbers, but the degree of pessimism that I hear here is really quite remarkable."
Economists polled by "Reuters" last week forecast the Bank of Israel to leave its key interest rate at 3.25% after a series of rate hikes earlier this year.
When asked whether Israel was closer to developing economic ties with Arab countries hit by uprisings, Fischer said: "So far it's been more negative than positive."
"We are only eight months since they started. They haven't had elections, they haven't formed new governments by in large, it depends on both sides."
Published by Globes [online], Israel business news - www.globes-online.com - on September 25, 2011
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