Shekel doing well
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Morgan Stanley: Shekel is astonishing
'Israeli economy and financial markets show exceptional resilience,' writes American investment bank Morgan Stanley about Israeli market after war. Investment bank compliments shekel, writes that its 'fair' exchange rate stands at less than NIS 4 to dollar
Serhan Cervik, a Morgan Stanley analyst for Middle East and North Africa, writes, "The shekel is astonishing – the Israeli economy and financial markets show exceptional resilience."
War and Economy
In first half of year, 28 percent increase in exports to Arab world was listed, amounting to USD 138 million, about 92 percent of which accounts for exports to Jordan, Egypt
The Morgan Stanley economist writes in his report: "Who would have thought that the shekel would strengthen in the presence of the global financial earthquake and the security shocks at home (in Israel)? This is amazing, yet not surprising, at least from our perspective." In the estimation of the analyst, the shekel is undervalued by 30 percent to the currency basket, and by 12.5 percent to the dollar.
The significance of this is that Morgan Stanley believes that the dollar's foreign exchange rate should be lower than 4 shekels, around 3.85 shekels. However, Morgan Stanley doesn't expect the shekel to adapt itself to this rate any time soon because of the cash flow of local residents to investment channels abroad and the risk associated with the instability on the geopolitical plane.
Morgan Stanley notes that Israel has a long, unsuccessful history of adopting the Keynesian model (model of the British economist John Maynard Keynes who maintained that government expenditures should be increased), but in the last three years, the Israeli economy has proven that the best ways to handle the effect of the war in Lebanon and the territories is to maintain budgetary discipline and to let the private sector lead the recovery and growth process.
The American investment bank is of the opinion that the Israeli GDP will grow by 4.8 percent this upcoming year.
