Citi analyst David Lubin predicts that Israel's GDP will grow 3.9% in 2010, 4.4% in 2011, and 5% in 2012.
"We think the next few months will see a rising interest in the prospects of Israel's emergence as a gas exporter. We think that gas could contribute over $4 billion per year to Israel's balance of payments at current prices, helping to strengthen the exchange rate over time."
Lubin predicts that the shekel-dollar exchange rate will fall to NIS 3.60/$ by the end of 2010, and will be NIS 3.61/$ at the end of 2011. He says that, in the medium term, the shekel's appreciation is inevitable, given the strength of Israel's balance of payments, the emergence of a positive international investment position, and the strong chance that Israel could be become a net gas exporter.
Lubin says, "The Bank of Israel will likely continue to continue to struggle with the dilemma of the need to hike rates, but wanting to limit currency appreciation." He predicts that the interest rate will rise to 2.25% at the end of 2010 and then to at least 3% in 2011.
