Israeli exporters on edge with CB pandemic support plan in doubt

ISRAEL’S biggest exporters are bracing for the end of central bank (CB) support that’s helped them stay competitive during the pandemic, a move they say may weigh on a $100-billion industry crucial to the nation’s economic rebound.

The Bank of Israel is close to exhausting a $30 billion dollar-buying program that’s reined in gains in the shekel and made exports cheaper to foreign buyers, while the nation battled Covid-19. With the economy on the mend, and Governor Amir Yaron signaling July 5 that the program was a temporary salve, companies from Teva Pharmaceutical Industries Ltd. to Israel Aerospace Industries Ltd. are on edge.

“We’re living with uncertainty,” said Natanel Haiman, the head of economics at the Manufacturers’ Association of Israel, a Tel Aviv-based organization that groups more than 1,850 companies accounting for more than 90 percent of the country’s industrial base. “It’s a daily battle to keep the production lines moving,” partly because of the exchange rate.

The debate over the program mirrors the dilemma facing policymakers the world over as central banks consider how quickly to remove stimulus measures enacted as the pandemic erupted. In Israel, shekel policy provides an additional ingredient. The currency has appreciated more than any major counterpart in the past decade, eclipsing even the Swiss franc and the euro, and hobbling the exporters that account for more than a quarter of the $400-billion economy.

Take Tel Aviv-based Healthy.io, a seven-year-old company that adapts smartphone cameras for kidneydisease detection at home. Founder and Chief Executive Officer Yonatan Adiri says more than 20 percent of the cash that his company raised over the past five years has effectively been lost because of the shekel’s appreciation. Now he’s considering moving operations to the US.

“You raise money in dollars and you spend most of it in shekels, especially in the early years,” he said. “It’s now as cost-effective for me to build a team in Boston or London as it is in Tel Aviv.”

Israel’s gross domestic product is forecast to grow 4.8 percent this year, after shrinking 2.5 percent in 2020—its sharpest downturn on recorded—as the country benefits from one of the world’s fastest vaccine rollout programs. Unemployment has dropped, inflation is in the middle of the central bank’s target range and the country’s current-account surplus has risen to $5.85 billion.