The dream of Israel’s miracle economy is……
It seems that the Israeli economy will only grow by 2% in 2014, and by not much more in 2015. That is way down on the customary 3-4% figures that the Holy land has witnessed for much of the past decade. And it barely covers the increase in population.
Gloomy stats seem to be everywhere. Unemployment has risen from 5.9% to 6.4% in the past year. Exports have stagnated. Interest rates are approaching zero. The budget deficit is set to bulge to 3.4% next year. About the only thing driving growth is private consumption, and that too is faltering.
Israel’s success, led by high-tech and entrepreneurship and immigration, appears to have come to a painful halt. Has the light gone out of the dream?
Well not quite. It is known that if you want to see how so-called financial experts view the future, look at stock market movements. So there must be a reason that the Tel Aviv Exchange has risen 23% over the past 12 months to a new high.
Well one reason is the ‘economic miracle of Israel’s gas fields’. These are set to be a major game changer, pumping hundreds of billions of dollars into the economy over the next few decades. The revenues are set to fund a transformation of the country’s infrastructure.
A second factor is that Israeli society appears to have an ‘inbuilt dynamic’ that allows the country to adapt rapidly to the next high-tech phase. From internet to bio to mobiles to nano to clean, and now on to cyber tech. For example, this year, Israeli companies have shown that they are leaders in the new sector.
A final point to consider is the recent war with Hamas in Gaza. Yes, the military is demanding six billion shekels to replace stocks. And businesses in the south of the country were reporting a 30-40% drop in sales during the usually busy summer months. However, Israel’s economy has a consistent history in bouncing back after campaigns. This can be seen in the first reports that indicate how consumer spending has leaped over the period of the Jewish New Year.
So the news for global financial analysts is the Israel’s economy may be growing at a slower pace than in the past and the current budget discussion amongst bickering politicians may look very professional to an outsider. However, the fundamentals of the economy are not just secure. Israel is preparing for the next wave of commercial growth.
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