The Bank of Israel is monitoring
the developments in the financial markets in Israel and abroad, as well as the
policy measures of central banks around the world.
The Monetary Committee held its
weekly discussion today, led by the Governor.
The Research Department and the Markets Department presented the recent
developments, revisions to the growth forecasts around the world, and
assessments regarding the possible effects.
Among other things, the Committee discussed the measures taken by other
central banks, and various scenarios of how the preventive measures taken in
Israel can directly affect economic activity.
At this stage, despite the specific impacts experienced by firms in a
variety of industries, there is no evidence of a significant macroeconomic
impact on the Israeli economy. In a
scenario in which the spread of the virus is halted in the coming months, the
assessment is that the global economy is expected to recover relatively
quickly. If the crisis persists, and
particularly if the preventive measures in Israel become more serious and
persistent, there is expected to be a significant economic impact.
The Committee’s assessment is that the terms of financing in the economy at the
present time are very easy, and the low interest rate combined with the
continuing foreign exchange purchasing policy provide the necessary support for
the economy. The Monetary Committee will
hold its periodic monetary discussion at which the interest rate decision will
be made on April 5 and 6, and will continue convening on a weekly basis. If the economic or financial conditions
worsen significantly, the Committee will use the variety of tools at its
disposal whenever necessary.
The periodic meeting of the Financial
Stability Committee was held yesterday at the Bank of Israel, led by the
Bank of Israel Governor, and a central topic at the meeting was a discussion of
the economic and financial impact of the coronavirus on the economy. The Committee members reviewed the situation
in the areas under their responsibility, and it was noted that while the equity
markets in Israel and abroad have responded to the developments with price
declines and increased volatility, there are no signs that the financial
markets are not functioning, and liquidity in the various markets is good. The Financial Stability Committee is
monitoring all of the developments in the system, and provides a platform that
enables continued optimal coordination between the regulators. The supervisory agencies have the tools to
deal with challenges that may develop in a scenario where the financial risks
in Israel and abroad worsen.
The bottom line in the
discussions and analyses at the Bank of Israel is that this is a continuing
event, and that there is tremendous uncertainty regarding the continued spread
of the virus and what it means from the standpoint of economic activity in
Israel and abroad. The uncertainty is
due to three factors: 1. The intensity of the spread of the virus in additional
countries, as well as the extent of the spread in Israel. 2. The intensity of the preventive measures
taken in various countries and in Israel, and the economic impact of these
measures. 3. The duration of the
incident.
The strong basic economic data
in the Israeli economy—including the low debt-to-GDP and unemployment rate, the
current account surplus and the high level of the foreign exchange reserves,
and the strong financial system—increase the economy’s robustness in the face
of developments.
The Bank of Israel continues
to monitor developments on an on-going basis, and is in close contact with
the relevant parties in the government, particularly the Ministry of Finance,
and with the economic and financial system.
Members
of the Monetary Committee: Prof. Amir Yaron, Governor of the Bank of Israel
(Chairman); Mr. Andrew Abir, Deputy Governor; Prof. Michel Strawczynski,
Director of the Bank of Israel Research Department; Prof. Reuben Gronau; Prof.
Zvi Hercowitz; Prof. Moshe Hazan.
Members
of the Financial Stability Committee: Prof. Amir Yaron, Governor of the Bank of
Israel (Chairman); Mr. Shai Babad, Director General of the Ministry of Finance
(Deputy Chairman); Mr. Andrew Abir, Deputy Governor; Mr. Roni Hizkiyahu,
Accountant General, Ministry of Finance; Dr. Hedva Ber, Supervisor of Banks;
Dr. Moshe Bareket, Supervisor of Capital Market, Insurance, and Savings; Ms.
Irit Mendelsohn, Bank of Israel Supervisor of Payment Systems; Ms. Anat Guetta,
Chairperson of the Israel Securities Authority; Prof. Avi Simhon, Head of the
National Economic Council—Observer.