The prime minister reassured the public during a welcoming ceremony for the Bank of Israel’s new chief, Prof. Amir Yaron.
By Batya Jerenberg, World Israel News
Prime Minister Benjamin Netanyahu took the opportunity Monday, during the official appointment of Professor Amir Yaron as governor of the Bank of Israel, to state his confidence in the country’s financial stability following Sunday’s steep drop in the Tel Aviv Stock Exchange (TASE).
“I am certain that we will succeed in riding out the current turmoil in the capital markets,” he said regarding the five-percent drop in the TASE’s value on Sunday, which was the worst plunge in Israel’s stock market in the last seven years.
“The Israeli economy creates competitive value for the products and services that people want to buy. We have the ability to produce new products and open new markets,” the prime minister said.
Seemingly referring to mega-deals recently made with India and others possibly in the works in Africa and Latin America, Netanyahu noted that “the world’s markets are opening” to Israel. He also pointed to Asia, saying, “We are in an advanced stage of negotiations with China to develop a Free Trade Area.”
The quality of life in Israel is rising while the gap between rich and poor is getting smaller, Netanyahu said, adding that more people are employed “because the [financial] reforms forced the haredim [ultra-Orthodox] and Arabs to enter the work force.”
Although the country is financially stable, Yaron is taking on his new position during a challenging time in the local equity market, which has lost about 11 percent of its value in December, wiping out some NIS 85 billion in investments.
The TASE was not acting on its own, as worldwide stock markets have experienced widespread sell-offs this year. For example, Globes reported Sunday that the American S&P 500 Index has dropped 10% since January, while Nasdaq has fallen 14%. The Bank of Israel itself, which invested all of its $115 billion in foreign currency reserves in worldwide capital markets, will likely be on the hook for a $2 billion loss in 2018 because of the plunge in the share and corporate bond markets.
President Reuven Rivlin also addressed the ceremony, stressing the complete independence of the Bank of Israel in dealing with the fiscal matters of the state. He mentioned the recent announcements of price hikes in foodstuffs and electricity, which, he said, “were blocked – for now — by the quick intervention of the finance minister and his staff.”
“Keeping prices stable is one of the central tasks of the Bank of Israel, which is also the financial adviser to the government,” he added.
“The immediate challenge facing the Bank of Israel is the normalization of monetary policy – a process at the end of which the Bank of Israel will be able to act by using the tool of the interest rate to effectively stabilize prices in accordance with economic developments and stabilize the inflation rate at the center of the target range,” Yaron said.