Afternoon Tea in Jerusalem Blog

In addition to my work as a business coach, one of my interests is blogging about life in Israel. This is a country full of contrasts – over eight million citizens living in an area the size of Wales. You can see snow and the lowest place on the globe in the same day. Although surrounded by geopolitical extremes, Israel has achieved a decade of high economic growth. My work brings me in contact with an array of new companies, exciting technologies and dynamic characters. Sitting back with a relaxing cup of strong tea (with milk), you realise just how much there is to appreciate in the Holyland. Large or small operations, private sector or non profit, my clients provide experiences from which others can learn and benefit.

So Israel is heading towards its fourth general election within 24 months. The Kenesset (Parliament) failed to pass the 2020 budget and thus the government automatically fell. In other words, despite controlling the Finance Ministry since December 2014, the Prime Minister has failed to deliver a budget since December 2018, and nothing serious is planned for 2021.

How can the economy carry on?

Earlier this morning, I listened to a seasonal wrap up of the global economy from the Economist Podcast Unit. (Recommended). Overall, the participants were cautiously optimistic for 2021. I could not offer the same prognosis for Israel.

I agree with S&P’s analysts that there are still strong fundamentals, like the balance of payments. And yes, Israel is riding the global trend, where investors are ploughing big money into hightech.

However, hightech represents about 15% of the economy. Around 95% of the economy is made up of small or medium sized businesses that are struggling.

Last week, I was shopping in the centre of Jerusalem. In what is known as “the triangle”, a key retail area, I would estimate that around 15% – 20% of the premises had shut up shop and gone. I asked one well-known shop owner if he had been visited by local or central bureaucrats or politicians. As he said to me with a wry smile, “they are too busy”.

The Israeli economy has already contracted by nearly 3% this year. It is unlikely to make that up next year, even more so as the political uncertainty will continue until the early summer. (It is assumed that it will take a further 6-8 weeks after the election to form a coalition). Meanwhile, as the country approaches its third lockdown, unemployment remains at over 14%.

The government budget provides direction and guidance. No budget means that everyone is left to fight for the themselves. With healthy fundamentals, you can get away with that for a while. However, sooner rather than later, you end up destroying what has been created in the past.

It does not take two years to pass a budget. That is a sign of incompetence – politicians playing politics with the health of people’s finances – and those of their children – setting lives back years. I hope that those responsible for this negligence will be thrown out of power.

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