Israel’s economy – taking a hit, but still packing its own punches
Israel’s new Minister of Finance, Yair Lapid, is putting together a package of tax hikes and budget cuts. He will seemingly break many of his election promises and those of his Prime Minister despite being in office barely for eight weeks. However, the country’s coffers is short of around 14 billion shekels (around US$4 billion) and so something has to give.
It will not be pleasant. Opposition parties will have a field day, pointing out with much justification how the average citizen will suffer. However, that does not mean that all is gloom and doom with the finances of the Holy Land. With growth still forecast at about 3% for each of the next two years and unemployment remaining steady at the 7% level, Israel is not sinking like other Mediterranean economies.
In fact, Israel has much to shout about to the rest of the world. For example, this week, the vice president of GE’s software and analytics centre, William Ruh, was in town. As he said:
the world of industry is on the brink of an Internet revolution that will transform it in much the way Internet has transformed the world of retail, music and social networking. Industries from rail to aviation are moving from “unintelligent” machines to “brilliant” machines, which are able to harness massive efficiencies by taking in real-time information and adjust accordingly…………Israel is probably the best place in the world to do cyber security (which will protect those new systems).
Ruh’s comments came in the same week that Avago (Singapore) purchased a small Israeli start up called CyOptics for US$ 400 million in cash. The company’s optical components enables the high-speed transmission of video content, currently a major stumbling block for mobile receivers.
In fact, while Israel’s economy has chalked up a number of achievements in recent weeks, what caught my eye was a survey from MIT. Analysing 120 universities, the report cited the Technion in Haifa as the 6th most suitable centre for innovation and entrepreneurship – one of only two non American establishments in the top ten places.
Very impressive, but the question is why or how does Israel manage to compete despite being a small country and being surrounded by violent enemies? One answer was provided by a new ‘social progress index’. This covers “fifty-two indicators in the areas of basic human needs, foundations of wellbeing, and opportunity show relative performance in order to elevate the quality of discussion on national priorities and to guide social investment decisions.”
Of the 50 countries tested, Israel came 16th, leading the Middle East block by far. Specifically, “Israel excels at providing building blocks for people’s lives such as Health and Wellness and…..of issues covered by the Opportunity Subindex, Israel outperforms in providing opportunities for people to improve their position in society….”