The strength (and weakness) of the Israeli economy
By all accounts, Israel’s economy is swimming along very handily, despite the complete discord between the Prime Minister and his Minister of Finance.
Israel’s economy has been hailed as one of the most robust in the world. Near-nonexistent inflation and a low unemployment rate of 4.8% have helped propel Israel to the No. 3 spot on a list of the world’s most stable and promising economies for 2016 published by the Bloomberg financial news agency. ………In March, Bank of Israel said the Israeli economy grew by 4% in 2016, exceeding projections by 1.2 percentage points and marking the most solid economic performance for the country since 2012.
Fair enough. That summary did come from a newspaper, Israel Today, that is closely linked to the Prime Minister. But let us give credit where credit is due.
An OECD report, summarizing Israel’s performance since joining the organisation in May 2010, is equally encouraging. It reveals a really strong set of macro economic indicators. For example: –
- Israel’s debt ratio in relation to GDP stands at 62% and falling, while the OECD average hovers close to 90%.
- Israel’s economy has grown over 23% in 7 years, about double the OECD average.
- The average unemployment rate in the OECD is 6.3%. The rate in Israel fell to 4.1% last month.
- Israel’s public finances have recorded a 4% annual surplus for several years, much healthier than in the rest of the OECD
So where is the proverbial “but”?
It seems that much of the new stability, should I say additional wealth, is not finding itself to those who could do with it. Consider these numbers.
- Israel has one of the highest levels of inequality in the world between the top and bottom income earners.
- At 18.6%, Israel has the highest level of poverty in the OECD.
- Only 8.6% of the GDP in Israel reaches the ‘have nots’, far below the OECD average of 12.3%.
- Israel invests less in health and in education than its fellow members of the OECD.
Now, it is possible to argue that Israel is a special case. It has to devote extra resources to defense needs. Internally, the make up of the population is not homogenous. And so the arguments continue.
What cannot be denied is that the government is consistently failing in pulling up the lower economic echelons of society. One day, that socio-economic failure, if it continues, will come to judge us all. That economic price is often very painful.