Sunday 1st August 2021 is arguably the most significant day in over three years for Israel’s economy. For the first time since March 2018, an Israeli cabinet is due to approve a state budget. Could the Israeli economy finally receive some much needed direction?
Let’s be clear, the Israeli economy is not in dire straights. The credit rating agency, Fitch, has just confirmed the country’s status at the highly respectable A+ level. “The economy has been more resilient to the pandemic shock than many rating peers, reflecting the strong performance of high-tech industries and the early and fast progress in vaccination. Fitch’s forecast implies that Israel will outperform the ‘A’ median for GDP growth for each year from 2021 to 2023.”
On the tech side, last week another three Israeli companies reached unicorn status. And we know that at least three highly respected investment offices are opening shop in Tel Aviv in the imminent future.
That is all wonderful for those who “have’. However, there are over nine million people turning round the Israeli economy. They have seen miserly improvement for years in health and educations services. Tax rates need to be updated. And of course, structural changes are urgently sought;
- Breaking up the monopoly of food distribution.
- The management of the ports.
- Opening up religious services to greater competition
- Permitting new banks to enter the market
- Etc, etc, etc
The current government survives on a majority of one. Between now and the budget’s final approval in the Kenesset around about November much will be haggled over and compromised. The ultra-orthodox are already planning their tactics to ensure that their constituencies are not totally ignored. The process will not look pretty.
However, that process will take place. That is what counts. And that is why there is now room for hope in Israel. It is hope and expectation that throughout history has often driven forward many an economy.