Bank of Israel Governor Stanley Fischer said Wednesday that the national economy was faring well in the face of uncertainty that is pervading global markets, asserting that continued fiscal responsibility would enable Israel to avoid a recession but not a complete slowdown in growth.

"Israel's economy is in a relatively strong position, mainly due to the policy pursued by different governments over the past few years," Fischer said in a briefing to parliament's finance committee.

Fischer said that while a high level of uncertainty predominates global markets, he is mainly concerned about Europe's negative growth rates and high unemployment.

"The situation in Europe is serious... reflected by the yields on government bonds, with extreme increases in countries experiencing debt crises," he said.

Citing an agreement reached recently on the need to limit the fiscal independence of Eurozone member states, Fischer expressed hope that the single market will remain intact.

"We don't know what would happen if a scenario (of the monetary union dissolving) would become a reality ... We are trying to prepare ourselves for such an eventuality, but there is great uncertainty as to how it would occur or if it will occur," he said.

The Organization for Economic Cooperation and Development (OECD) recently published an updated growth forecast for Israel, according to which GDP will rise 2.9 percent in 2012. Fischer said the Bank of Israel's latest forecast, compiled in September, predicts growth of 3.2 percent while the government deficit is expected to level at 3.5 percent of GDP by the end of the year.

Commenting on recent government-led social welfare programs aimed at lowering poverty and narrowing wage disparities, Fischer urged Israeli lawmakers to avoid taking "populist measures" that incur high long-term costs.

He said that social programs and defense spending should not widen the deficit, but rather be financed at the expense of other priorities or via increased taxation.

"The central bank advises the government and I'm not here to determine priorities for the government or parliament ... But at some point, one must ask how much needs to be spent and how will it be financed," said Fischer.

Prime Minister Benjamin Netanyahu last month echoed Fischer, saying that Israel had largely avoided the woes besetting the world economy and European Union countries by keeping a tight lid on spending.

"We must reject, with an iron fist, populist legislation that comes from parliament," Netanyahu told his cabinet.

Xinhua