23 October 12–Merrill Lynch today raised its 2012 GDP growth forecast for Israel from 2.7% to 2.9%, citing recent improvement in the global economy and resilience of the domestic economy in the first half of the year. Although it reiterated its 2.9% growth forecast for 2013, it warned of risks. It also pushed back its expectation of an interest rate cut by the Bank of Israel to 2% to the first quarter of 2013.

Merrill said that its growth upgrade for Israel is based on its better assessment of the US, eurozone and Chinese economies, all of which are important for the Israeli economy. It says that every 0.1 percentage point improvement in the US and eurozone economies boosts the Israeli economy by 0.2 percentage points and 0.1 percentage points, respectively. The reverse is also true.

The lower risks of a hard landing in China, which is increasingly important to the Israeli economy, also helps. Merrill Lynch says that China directly accounts for 4.5% of Israel’s exports, as well as indirectly via exports to other Asian countries, which account for 20% of Israel’s exports…Read More>>

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