It is very important to keep cool in times like these, especially when talking about economic estimates when it is said that economics are 10% mathematics and 90% psychology. Unnecessary panic can become a self-fulfilling prophecy.
That said, it seems that the mood at the Israeli government, especially at the Ministry of Finance and Bank of Israel, borders on complacency.
The picture that emerges after eight days of fighting in Gaza leaves little room for optimism, especially after today's bus bombing in Tel Aviv. It does not seem that this war will end anytime soon. Damage to property is growing, absentee workers cannot produce, companies are not making profits because they are not operating, and hundreds of millions of shekels will be needed to pay the salaries of the thousands of IDF reservists called up.
It does not end there: the Ministry of Defense will probably demand billions of shekels for a budget supplement - and this is before a ground operation, which would raise the costs of the war to another level of magnitude, if it is launched.
Pillar of Cloud fell on the Israeli economy at a bad time. Growth is slowing, private consumption per capita has fallen after a long period of growth, and exports are waning because of the recession in Europe and slowdown in the US.
Moreover, the fiscal situation is equally dismal. The budget deficit in 2012, a year of economic growth, will be 4% of GDP and will be just as high in 2013.
This war does not help. Ministry of Finance officials and the economic captains, including Minister of Finance Yuval Steinitz, had better stop talking about how "all is well", and begin preparing us for hard times and austerity measures ahead. The public should not buy the calming messages and realize that this war will cost a heavy economic price that we will all have to pay.
Published by Globes [online], Israel business news - www.globes-online.com - on November 21, 2012
© Copyright of Globes Publisher Itonut (1983) Ltd. 2012