Israeli export growth is expected to slow to 6.5% in 2011 from a 16% rise in 2010, the Israel Export and International Cooperation Institute forecast on Monday.
"Israeli exporters are dealing with lower growth in traditional export markets that comprise about 60% of Israeli exports, a slowdown in global trade and a decline in the rates of growth of imports in countries with which Israel trades," Avi Hefetz, the head of the institute, said in a statement.
He added that the continued strengthening of the shekel was also hurting exporters since a strong local currency erodes the income and hurts profits of exporters.
Total exports of goods and services are expected to reach $80 billion this year and hit $85 billion in 2011, the institute estimated.
With the exception of the crisis year of 2009, Israeli export growth in 2011 is expected to be its lowest since 2003, it added.
Exports, which account for some 45% of the country's economic activity, dropped nearly 10% in the third quarter after sharp growth in the prior four quarters. The decline was mainly due to weakness in the US and European economies – which together make up more than 60% of total exports.
Israel's economy is forecast to grow 4% in 2010 and at a slightly slower pace in 2011.
Israel's government is encouraging exporters to expand sales to fast-growing markets in Asia and Latin America.
In 2010, the United States remained Israel's largest trading partner, with exports of $11.6 billion excluding diamonds. Britain was No. 2 – up from No. 4 in 2009 – at $2.1 billion. China jumped to No. 5 from No. 10 with exports of $1.7 billion.
The shekel stands at a 28-month peak against the dollar and a six-month high versus the euro. The Bank of Israel has attempted to stem a rapid appreciation through buying foreign currency from time to time.