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Global Outlook, Spillovers, and Vulnerability in Israel

This report discusses the outlook for the world economy and its impact on Israel, as well as the constraints on Israel's fiscal options. It also analyzes the extent of the crisis and the potential for recovery, taking into account the risks and challenges. The report highlights the trade linkages, external asset exposures, and spillovers, and suggests counteractive policy responses. It also examines Israel's robust external position and market signs of discomfort, emphasizing the concern for fiscal sustainability. The report concludes by examining the implications for fiscal rules and the importance of balancing economic impacts with sustainability and market confidence.

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Global Outlook, Spillovers, and Vulnerability in Israel

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  1. Global Outlook, Spillovers, and Vulnerability in Israel M.K. Tang (IMF) May 5, 2009

  2. Roadmap • Outlook for the world economy • Impact on Israel • Constraints on Israel’s fiscal options and implications for fiscal rules

  3. Free Falling Activity

  4. Extent of Crisis Catching Forecasters Off-guard

  5. Deep Recession, Tepid Recovery… Source: WEO April 2009

  6. …with Substantial Downside Risks Source: WEO April 2009

  7. Global Downturn Weighs on Israel

  8. 1. Trade Linkages

  9. 2. External Asset Exposures

  10. Main External Determinants

  11. Strength of Spillovers

  12. Counteractive Policy Reponses Can Boost Recovery Source: WEO April 2009

  13. Israel’s External Position Robust

  14. But Some Market Signs of Discomfort...

  15. …as Fiscal Sustainability a Concern… Source: IMF

  16. …and Global Financial Flows Could be Fragile

  17. Implications for Fiscal Rules • Economic gloom and uncertainty on near-term horizon • Automatic stabilizers could cushion the blow, even so financing risks nontrivial • Benefits of structural fiscal loosening hinge on impacts on sustainability and market confidence

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