Yesterday in Synagogue, I sat next to a friend who works for an international IT company in Jerusalem. Between the prayers, he voiced concern that his company was about to lay off 10% of staff and cut the salaries of the survivors.

Yes, the recession has reached Israel. The retail price index for October is expected to show  a drop of a whole percentage point. Car sales are down 19.7% as against the previous quarter. Gloom, but not doom.

I continue to maintain that the Israeli economy is facing this downturn in good shape. And the Tel Aviv stock market has picked up on that. Over the past 3 months, it has fallen 22%; difficult, but brilliant compared to the 35% of the FTSE’s world index. Let’s take some specific recent success stories.

1. Johnson & Johnson will acquire Omrix Biopharm for US$438 million. (Omrix is down the road from my friend’s employers.)
2. A holding company, Medinvest, has raised US$129 million, backed by 7 successful previous exits.
3. Plurality‘s efforts in the semiconductor business are already making it the target of companies like Intel and other giants. Its success at at a recent Japanese exhibition led to a central feature on Yahoo’s Finance pages.
4. HP has become the 11th multinational to sign an agreement with Israel’s Office of the Chief Scientist. Along with Deutsche Teleom, Microsoft and others, it will seek local technologies to match their own strategic development strategies. This is on top of their US$6 billion previously invested by HP in Israel.

For all the problems of its pension funds and aging politicans fighting for their reputations, the Israeli economy is telling the world that it has a lot more to shout about. Worth listening, in my view.