BibiGate and Israel’s economy – who wins?
For over two years, Israel’s Prime Minister, Benjamin Netanyahu, often called Bibi, has been investigated first by the police, who then passed on their recommendations on to the Attorney-General. Both teams were led by Bibi appointees. Both believe that Bibi has to answer charges in court on three separate accounts, involving bribery and breach of trust.
Bibi denies it all. And he realises that his best line of defense requires him to hang on to power. In a country where governments are always dependent on fragile coalitions, this has resulted in two inconclusive general elections within six months. Further, as the political stalemate continues, another walk to the polls looks likely in March 2020.
Where does that leave the economy? Ostensibly, not too bad. For example, “Moody’s senior credit officer Evan Wohlmann believes that Israel’s economic growth has outpaced most other advanced industrial countries over the past decade.” The credit rating remains at A1.
In parallel, FDI is strong. Unemployment is low at just under 4%. UK’s Pret A Manger restaurant chain is looking to enter the Holy Land. So, all-in-all, not a bad report, you might think.
Look again, much deeper.
GDP growth for Q319 may have clocked 4.1%, but this was based on one item. There was a freak one-off huge rise in car imports. Even worse is the fact that the greatest growth generator of the Israeli economy is also the main obstacle of economic growth—the endless traffic jams that decimate millions of work hours for the Israeli workforce.
How the Bank of Israel will react to these unreliable figures is to be determined. Israel’s top monetary experts must be worried by the fact that this year’s budget was cobbled together at the last moment. There is a clear gap in public spending programme. Further, there is no way that a budget for 2020 has been prepared, and there is no clear thinking how it could even be passed in the near future. That is a bright red warning light for the international financial markets.
Even that stunning unemployment stat is clouded with uncertainty.
Despite the record low in unemployment, the state of the labor market in Israel is not clear cut. The number of available jobs in Israel has been declining in recent months, a figure likely to indicate a slowdown in the expansion of economic activity.
What next? Bibi has always proclaimed his innocence and is determined to stay where he is. He still controls his political party, the Likud, just. So long as that plank of support is in place, the country remains paralysed.
As either Minister of Finance or Prime Minister, firend and foe will agree that Bibi can be credited for much much of the success of Israel’s healthy economic performance since 2001.
As we close off 2019, the economy will continue to plod along due to its own core strengths – the high tech sector, innovation, export sales to new markets, etc. However, that drive cannot remain in high gear for ever. When that slowdown eventuates, regardless of their political persuasion and ethnic background, the electorate will begin to ‘feel it’, which could determine how people will vote next time. Ironic?