Finance Minister Ronnie Bar-On is warning that Israel is almost certain to face an economic slowdown in the coming year.

 

Bar-On told the Globes business news service this week that "the combination of a world financial crisis and an economic slowdown in most Western countries, the additional negative effects on the Israeli economy, such as persistent extreme volatility in exchange rates, inflationary trends and possible developments in credit, lead to the clear conclusion that we can expect a slowdown in economic activity."

 

However, he noted it was impossible to predict how severely Israel might be affected. "The strength of these factors on a slowdown is still difficult to foresee," he added.

 

The Dow Jones industrial average closed 777.68 points lower on Monday – plunging 6.97 percent in its biggest loss since 2001 after a $700 billion government bailout plan was narrowly defeated in the U.S. House of Representatives by a vote of 228-205.

 

The Standard & Poor (S&P) 500-stock index plummeted 8.77 percent, its deepest plunge since 1987, and the Nasdaq composite index dropped by more than 9 percent.  One day later, the S&P zoomed back up by 5 percent, a one-day rise not seen in at least six years, as brokers bet that American lawmakers wouldn't let the situation continue much longer.

 

Wednesday night the U.S. Senate voted 74-25 to approve the $700 billion bailout package that was turned down by the House. Both presidential candidates John McCain and Barack Obama voted in favor of the measure. It was expected that the bill would return to the House for another attempt at passage on Friday.

 

Bank of Israel Governor Stanley Fischer was cautious about how the uneven situation in the financial sector in the United States would affect the local economy in the Jewish State, although he was generally optimistic.

 

"We have to be ready to deal with the ramifications of this situation," he told an interviewer on Voice of Israel government radio Sunday. "We can't know where, in the long range, the changes in the world will harm our financial network….  The only thing I am very worried about is that our financial network is very dependent upon trust. But if someone starts rumors that this or that institution is in trouble, then he himself causes the troubles that he spoke about."

 

Grim Outlook Seen in Social Services

Meanwhile, the Ministry of Social Services dealt with almost as many welfare recipients in the first eight months of 2008 (1,246,978) as had applied in the entire 12 months of 2007 (1,270,896).

 

The capital of the country led the Land in the number of welfare recipients: some 118,000 residents of Jerusalem applied for social services since January 2008.

 

Some 24 percent of the total applicants were suffering extreme poverty and half were of working age. The Social Services Ministry provided pro bono legal services, centers for victims of domestic violence and sexual assault, senior assistance and services for pensioners, families, people with disabilities and at-risk youth.

 

Also included was increased financial support for elderly Holocaust survivors, per the recommendation of the Dorner Commission. Rehabilitation programs, administration costs and budgets for local authorities rounded out the ministry's expenses.