Israeli exporters must adjust to the stronger shekel because the country’s policy makers have limited options to rein it in, Prime Minister Benjamin Netanyahu said.
The Israeli currency has rallied 6.1 percent in the past 12 months, the most among 31 major currencies tracked by Bloomberg. The head of the Israel Export & International Cooperation Institute has called the appreciation “a mortal blow.”
“There are few things we can do. The central bank government is considering them,” Netanyahu said in an interview with Bloomberg TV in Davos. “I tell our exporters, who are very nimble mammals, that ultimately you have to adjust and that is hard.”
Exports account for about a third of Israel’s economy and have been a growth engine for the past decade. Last year, exports contracted 0.1 percent, according to the central bureau of statistics, hurt both by the shekel and sluggish global demand. Israeli manufacturers expect to double job cuts amid a projection by the Manufacturers Association that sales abroad will shrink 6.1 percent this year.
Steps by authorities, which have included three rate cuts that brought borrowing costs down to 1 percent and Bank of Israel foreign currency purchases of more than $5 billion, have failed to stop the shekel’s ascent.
“I don’t know of any country, certainly not a small country like Israel, that can actually control its exchange rate all the time,” Netanyahu said.
Promoting his country as “Innovation Nation,” whose technology made up more than 40 percent of industrial exports in 2013, Netanyahu met with heads of companies including Yahoo Inc. and heads of state from Australia to Mexico and Nigeria.
The focus is on cyber security, where Netanyahu said yesterday his government has made a “massive investment.”
Israel is choosing to open up the industry, even as it fends off thousands of cyber-attacks on government sites daily, because of the “tremendous business opportunity,” Netanyahu said in the interview.
“There is a decision to take a gamble on expanding our cyber cooperation with countries and companies because we have extraordinary technology,” Netanyahu said.
Netanyahu established the National Cyber Bureau two years ago to coordinate among the government, military and civilian sectors to help protect vital computer systems and promote a cyber defense industry that has grown from a few dozen companies three years ago to more than 220, according to the Tel Aviv-based IVC Research Center.
Seventy-eight companies raised more than $400 million since 2010, and 20 multinational companies operate cyber-security development centers in Israel, half of them established since 2011, according to IVC.
“We’ve decided to become world leaders in cyber,” Netanyahu said. “We will manage to balance our security needs with our business opportunities.”