The economics of Jerusalem: 4 points for the summer
Easter, Passover, almost Ramadan….the main religions seem to be in shut down mode. And yet the economic meanderings of Jerusalem, Israel, suggest otherwise.
Netanyahu won the general election less than two weeks ago. How he builds his coalition will be interesting. It is clear that he wants to try to keep the Finance Portfolio in the hands of his own Likud party, but how that that will eventuate remains unclear.
What is a given is that despite the strength of the economy, there are many structural changes that remain firmly on the table and ignoring them is a regressive act. For example, it is now accepted that the value of real estate in Israel is on the rise, despite the previous government’s flagship programme on the issue. Much needs to be done, and soon.
Following up on that theme:
The high exposure to credit for construction and real estate, together with mortgages, constitutes almost half of the banking sector’s credit portfolio. It continues to be an important risk for the banking system. There is a risk in the event of a renewed upheaval in the housing market equilibrium…
The Bank of Israel has been warning about this for months, but the ruling politicians and their mandarins have preferred to ignore the warnings. In fact the Governor’s tenure was not renewed. Whoever inherits the Ministry of Finance will be required by the money markets to act, and do so in real time.
Looming in the background is President Trump’s deal of the century, which is slower being leaked. As one journalist observed:
If you break it down, the Trump plan amounts to calling on the Palestinians to accept quasi-economic autonomy, with a US administration giving them monetary support and raising money for them from countries in the region – the “Arab NATO”: Egypt, Saudi Arabia, Jordan, and the Arab Persian Gulf states.
And meanwhile, the Israeli Ministry of Foreign Affairs, still dominated by the PM himself, has found a clever way to encourage countries to move their embassies to Jerusalem. First step – open up a large bureau for joint financial cooperation.
For example, since the visit of the Brazilian President to Israel last month, there are discussions to open a trade mission in the capital. In a similar posture, Hungary and also Australia are looking to create diplomatic offices in Jerusalem, based initially around boosting trade with the Holy Land.
Despite it snowing on the Golan Heights this week, the commercial story around the city is heating up. I hope that the Prime Minister’s personal issues do not effect his efforts to move forward on all fronts.