Look at the core stats! Avigdor Lieberman, Israel’s Minister of Finance, could not ask for a rosier picture:

• Unemployment has been reduced to 2.9%, a 50 year low!
• The shekel is finally weakening, thus helping an export drive.
• The government debt is coming down, as revenues keep on beating forecasts.
• The credit rating agencies love the current fiscal and monetary agendas.

All good, no? So why my hint of pessimism?

The Israeli Parliament is about to reconvene after the Spring break. And the government looks as if it is tottering. It had a majority of 1 – in a 120 forum. That has been lost. The season of last minute, behind the scenes, dirty dealing is upon us.

And if all financial markets hate one thing, it is instability.

This current coalition government has lasted about a year. Its predecessors under Netanyahu’s direction dragged on for two years without a budget and no clear direction. Yet whether you approve of them or not, the current team has:

• Passed one budget and the planning of the next one is almost complete.
• Started to tackle the bureaucracy, which costs small businesses so much time and money.
• Reformed the mobile phone market for the ultra-orthodox sector.

If political instability erupts tomorrow, the Israeli economy will not crumble. The hightech sector reveals no signs of a slowdown, although there are fewer vacancies than a year ago. As Jon Medved, CEO of Our Crowd writes:

In Israel, where VC investment jumped by 150% from a then-record $10 billion in 2020 to $25 billion in 2021, startups attracted $5.6 billion in Q1 2022 – indicating an annual rate of approximately $22 billion, slightly below the previous year.

(13) Good news: Our world is flat | LinkedIn

However, what is different about May 2022 compared to the Netanyahu period is that the world is today faced by complex financial uncertainty. After two years of covid, economies are struggling to pick up. And yet primarily because of the Ukraine war, inflation is on the move. By how much can central banks rush to raise rates of interest without choking economies even further?

Such decisions require coordination between the senior bankers and those politicians and civil servants running the treasury in Jerusalem. If the latter are caught up with intrigues and negotiations to save their jobs, that smooth policy direction will not take place. Ouch!

The most important thing is certainty, for all players, in both the private and public sectors. It is clear that the economy wants certainty and a planning horizon. When there’s uncertainty, it’s damaging. Another round of elections, if it means a delay in passing the next budget, certainly does not help day to day management and will be harmful to economic reforms and continued investments that we think the economy needs. It is harmful both in the short term and to the ability to close gaps in the long term.

Bank of Israel’s governor, Amir Yaron: “If we let inflation climb, mortgage borrowers will be hurt” – Globes