Humm…Weren’t We Told A Weak Shekel Will Increase Exports?
Written by: Aaron Katsman | November 13, 2008
I clearly remember Israeli industrialists begging for the Bank of Israel to intervene in forex markets in order to pick up exports. We were told that a strong shekel caused a loss of over $2 billion in lost business, because Israeli goods were more expensive abroad. Industrialists got their wish and there was central bank intervention and not only that but the USD made a big move against most major currencies. Sounds like great news for exporters, right?
Wrong. Globes is reporting that Israeli exports actually fell in October, the first drop in 5 years. ” exports of goods (excluding diamonds) of 3.4% and an annualized increase in imports of goods of 2.8% in August-October 2008, the Central Bureau of Statistics reported today. This is the first drop in exports in five years, although there have been slowdowns in the rate of growth.”
If i am not mistaken, the Shekel has been strengthening over the last 5 years. That would mean that the industrialists have it backwards. Wouldn’t be the first time. I think( I remember hearing this but don’t quote me) former president Ronald Reagan once said something like ” a strong currency is the sign of a strong country and strong economy.”
Maybe the industrialists should concentrate on making better products at cheaper prices. I bet if they can compete on quality and price, then their sales will increase regardless of currency fluctuations.
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Aaron Katsman is Managing Editor of the Israel Opportunity Investor newsletter. He is lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.
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