Photo: depositphotos
Israeli Economy on the Brink of Crisis
Recent events in Israel — the downgrade of the sovereign credit rating, the rapid increase in the budget deficit, and a sharp surge in inflation — point to serious issues within the country’s economy. Even the most pessimistic economists were surprised by the rapid rise in the Consumer Price Index. For a regular month, a 0.6% increase is significant, but for summer, it’s almost unprecedented.
Alarm After Surprises
Alarm set in just three days after the downgrade of the sovereign credit rating and the publication of data on the soaring budget deficit. The new inflation figures clearly indicated that the Israeli economy is heading towards a crisis similar to the one experienced 50 years ago after the Yom Kippur War.
Economic Parallels with the Past
Why is the situation so alarming? On the tenth month of Operation “Iron Swords,” many aspects resemble events from 50 years ago: massive budget deficits, a sharp decline in economic investments, mass layoffs in leading companies, and capital flight (investors have reportedly withdrawn 50 billion shekels). The stock exchange is at a low, inflation is rising, housing prices are climbing again, and the national currency is weakening against the dollar and euro.
Government Inaction
Unlike in the past when the Israeli government, trying to save the economy, formulated an emergency economic plan, today’s government has taken no action. Finance Minister Bezalel Smotrich believes that once the fighting ends, everything will immediately return to normal. However, such hopes for a “miracle” appear unrealistic.
Inaction and Frustration
The government’s failure in the economic sphere has become evident. Concern is apparent in industrial circles, the business community, and the Bank of Israel. This concern is due to ministers who either do not grasp the scale of the danger or believe that “with God’s help, we will achieve complete economic victory.”
Loss of Patience and Lack of Plans
Even the Governor of the Bank of Israel, Prof. Amir Yaron, seems to be losing patience. He was recently invited to a meeting with the Prime Minister and Finance Minister to discuss a new budget. However, footage from the event showed an empty table with no documents or projects. The press release spoke of a “productive meeting” that resolved nothing.
Call for Urgent Action
A senior finance ministry official expressed doubts about the feasibility of a two-year budget at this stage: “What is needed is an emergency plan for the next two months, not for the next two years.” If the government does not develop a plan to rescue the economy, it could lead to further downgrades of Israel’s sovereign rating.
Anticipating Negative Economic Indicators
On the upcoming Sunday, August 18, the Central Bureau of Statistics will release economic indicators for the second quarter of 2024. The report is expected to be negative and may prompt Netanyahu and Smotrich to convene (for the first time in many months) a meeting to discuss the emergency economic situation.
Prospects for Economic Planning
The keyword here is “perhaps.” In the current political situation, where so much remains uncertain, making predictions is challenging. It is unclear whether the government will suddenly recall the economy and dare to formulate a plan that could save Israel’s economy as it did after the Yom Kippur War.
Source: vesty
