According to the Bank of Israel (BOI), inflation in the Holy Land will remain under 2% during 2022. On the back of rising energy costs, supply chain disruptions and geopolitical considerations, much of the rest of the OECD is looking at the 5% mark if not more.

What makes the respected economists in Jerusalem so certain that this challenge will pass by?

The BOI points to wage restraint, stable gas prices domestically and other factors. And yet each factor is not without its critics. For example, just by talking to friends, nobody is going to kid me that wages will keep to a 2% hike. After all, the growing hightech sector is chronically under-staffed.

Another issue that must be called out is the influence and the long arms of the hightech sector.

If we are to remain positive, in the words of “The Economist”:

Today’s tech giants (Apple, Amazon, Alphabet, Meta, Microsoft) are placing bets on the technologies of the future…..The frontiers on which big tech is most focused seem to be the metaverse, self-driving cars and health care. About a tenth of the five companies’ acquisitions in the past three years have been of firms that specialise in augmented or virtual reality. That spending spree has been led (predictably) by Meta, which made eight of the 13 purchases. 

Guy Scriven: USA Technology Editor

These are the very sectors where Israel has demonstrated areas of excellence. This should ensure that the FDI will remain steady for the foreseeable future, creating work and strengthening the eco systems. Will this demand also stoke up consumer expectations

Alternatively, as Wall Street finally begins to dip, it is the tech sector that is taking the biggest knock (for now). “The Nasdaq Index is down 9.7% from its peak but ………. over the past year half of the 100 Israeli companies traded on Wall Street (not only the new ones) have fallen more than 50% from their peak and only 20% have had single-digit falls.”

Will there be layoffs and thus a relaxation of the anticipated wage inflation? Or will money become tighter, thus causing the price of money to rise – a piece of tech jargon for saying inflation is on the way.

From my perspective, Israel is completely tied to the fortunes of the global economy. Thus despite the talk of officials, the deceleration of the economy because of omikron, the country cannot escape the owes of its major economic partners.

It is going to take more than wishful talking to keep the Israeli economy on track in 2022.

According to Dun & Bradstreet, the Israeli economy grew by 7% during 2021. Only the likes of China and India bettered that.

Does this teach us anything about January onwards?

Well, we know that the government is finally providing some direction, as the planners can finally work according to a targets set in an official budget. And we know that Israeli exports will continue to be boosted by the hightech sector. In fact, for the first time in the country’s history, the service sector (a.k.a. hightech) is more prominent than the value of goods sold overseas.

If we look at the stats, there are 3 positive trends that are likely to continue into next year.

1. Unemployment is down sharply, and there remain key bottlenecks in many parts of the labour market. For example, it is suggested that there are around 15,000 positions open in the hightech sector.
2. 2021 was another record year for M&As in Israel. “The number of deals that closed this year rose to 238, the highest total in the past decade and almost double the number of deals in 2020.” Israel remain s a hot place to invest in.
3. And in a year of yet more lockdowns etc, 2021 saw record new vehicle sales in Israel. Purchase tax earned by the government on new cars in the first 11 months of the year rose 20% from 2020. And there is more to be bought.

Will Omicron halt this progress? Who can assume what will or will not happen on the geopolitical front? Meanwhile, as things stand, the Israeli economy is well set for 2022. Happy new Year to all!

Israel is a small country. 50% of the territory is arid. On at least two of its borders, it suffers from constant violent infiltrations. And its existence is threatened by the nuclear aspirations of Iran.

So why of why is the economy booming? Look at the stats.

• Israel is likely to record a 7% growth rate in 2021, despite fighting a three week war with Gaza.
• The mark up for 2022 is estimated at a further 5%.
• The Israeli shekel is one of the best performing currencies in the world at the moment, a strength that is helping to lower inflationary expectations.
• Unemployment is now below 6% and still falling.

This week, it was announced that “Israel’s high-tech sector raised a record $25.4 billion so far in 2021, up 136% over 2020″. That is nothing short of outstanding.

Start-up whizz and commentator, Hillel Fuld, put this number into perspective with a comment on his LinkedIn page:

This year was the first time that the number of Israeli IPOs surpassed the number of exits. Meaning, more companies went public than were acquired. That is a very important metric. It means that we are no longer “Startup Nation”. The aggregate value of Israeli companies traded on Wall Street is $300 billion. Three hundred billion!!

Clearly much of the good news is a result of the bounce back from the depth of the corona period. I suspect that an element can be traced (somehow) to the end for now of political instability that saw four general elections in 24 months, as well as an unwanted rhetoric voiced by some politicians. On all this was achieved at a time when the previously vital tourism industry imploded!

It would be interesting to speculate what would have happened if government had been more involved, passing more laws, interfering in the cause of helping. We will never know of course, but there is a message here for the fiscal and monetary planners sitting at their desks in Jerusalem.

Avigdor Lieberman is not an obvious candidate to be the Finance Minister of Israel. But in an era of small parties and coalition politics, that has been his job for the past six months or so.

He is a former confidant of Netanyahu, who was one of the first of several to abandon the now former PM. Lieberman has been suspected of corruption. Senior parties members have been convicted. He is seen a pragmatic politician of the right, whose accent never hides his Russian origins.

Last month, for the first time in over 3 years, Israel’s Kenesset passed a budget. It had promised huge change. There are some reforms. But the most important issue is that the financial markets can identify with Israel’s attempt at proper governance. Yes, Jerusalem is trying to provide the platform for business leaders to surge ahead. One up to Lieberman.

The opposition leaders are furious. They have nicknamed the minister “liebermaS”. The word ‘mas’ in Hebrew means “taxation’. Cute, I suppose.

But let’s look at the state of the economy in Israel, late 2021, after nearly 2 years of Corona-economics.

1. The inflationary threat sweeping across most developed countries has yet to impact Israel. This is due to the strength of the shekel. The currency is in favour because despite political instability, Israel’s economy to-date has ridden out corona very well.
2. The level of unemployment in Israel fell significantly in November. At 5.7%, it is beginning to approach the record lows seen before corona days.
3. The fiscal debt continues to drop, down by over 50% since the peak of the corona crisis. Somebody seems to be managing the books very well, and thus there is less need to borrow money in the markets.

If there is a black line in the sky, it is something that I have mentioned several times in the past. In a country founded in 1948 on socialist principles, the gap in Israel between haves and have nots keeps widening. This is unacceptable, and possibly unsustainable for the long term. Hopefully, hopefully, Lieberman’s financial planners in Jerusalem will start to address this in 2022.

With a budget (finally) in place for 2022 and covid (seemingly) in check, can Israel’s economy look forward to a successful 2022?

The forecasts indicate almost 5% growth for the new year. Inflation, now the worry of central bankers in the EU and the USA, has not (yet?) fully featured in the Holy Land.

What we do know for now is that the core numbers are mostly showing positive times. An article from Reuters listed them, and they start with a largely successful inoculation campaign against covid. Even tourism is opening up.

In the third quarter, exports grew 7.5% for its fifth straight quarterly gain, while investment in fixed assets rose 14.8%. Private spending — the main economic driver — increased just 0.7% after a 33.5% jump the prior three months. Led by high-tech, exports continued to rise in the face of a 25-year high for the shekel versus the dollar and 20-year peak against the euro.

The high-tech sector continues to race ahead. In this small country of 9.3 million people, packed into an area the size of Wales, another 20 companies announced investment rounds in the past three days alone. And one, StarkWare, joined the unicorn club.

You never know what is round the corner, but for now the central economic planners in Jerusalem can be pleased with their achievement.