ECB chief: Israel's economy most successful in the world

The Israeli market noted a surprising 5.4% growth in the first quarter of 2008, the Central Bureau of Statistics (CBS) reported Monday.

The growth, though lower than the one noted in 2007's third and forth quarters, exceeded expectations, especially when considering the various recession warnings heard around the world and in Israel since the beginning of the year.

CBS data indicated that Israeli exports have gone up 12% and that goods and services imports rose by 18.7%, gross domestic product added 5.4% and gross industrial product added 6.1%.

Israeli lifestyle expenditures continued to rise in the first quarter as well, as private consumption increased by 14.1%. Housing industrial and transport investments all added some 9.6%, and goods and services exports have gone up by 23.6%.

Stanley Fischer, Governor of the Bank of Israel, is believed to announce interest rates will go up by only 0.25%, in order to maintain dollar rates from slipping back to the NIS 3.20 margin. Fischer is also expected to decrease interest rates over the next two months, aiming for a 4% interest rate by August.

Meanwhile, Jean-Claude Trichet, President of the European Central Bank, told Yedioth Ahronoth he believes the Israeli economy is the most successful one in the world today: "I'm amazed by the performance of the Israeli economy," he said.

Trichet, considered Europe's most influential financial figure, said he believes the Israeli market is "in the best possible position to reap the fruits of globalization and not be affected by the sub-prime crisis."

Positive as he sounds, Trichet refused to sign off on the widespread belief that the worst is over: "We see world markets internalizing the changes and reconfiguring assessments… This is a long process that still has some ways to go."

Sever Plocker contributed to this report