Like the politicians, Israeli households may also prefer to give the Palestinian ceasefire another chance before announcing a return to military action against the terrorists. If that is what happens, it will be a blessing for the Israeli economy, which needs buyers in the stores, shopping malls, and entertainment centers. From this viewpoint, the increased uncertainty over the future, as far as security is concerned, will have a negative impact on Israel’s chances for an economic recovery in the first quarter of 2004.
Israeli consumers responded with joy to the declaration of the Palestinian hudna (ceasefire), and voted with their feet. Unlike some generals, households decided that they were part of the ceasefire, that it had relevance for them, and it was time to implement various plans, even if cautiously, and even if the figures do not indicate a return to the consumer behavior of two years ago.
It is clear that a final collapse of the ceasefire will mean the return of the consumer behavior that prevailed in the second half of 2002 and the first half of 2003. Anyone who claims that he can get along without a ceasefire and without a diplomatic process, and that a return to an open armed conflict is preferable, should ask the restaurant and theater goers, football fans, airport duty-free and shoppers, families strolling through shopping malls, and those starting to think about replacing their car, buying a TV set or an air-conditioner, and even extending their homes.
The ceasefire demonstrated how quickly consumers respond to changes in the economy and the country. Almost overnight, buyers appeared in the markets, and a change in the general mood was evident. It is enough to look at the contrast between the way the consumers and the sour-faced politicians and generals greeted the road map. The rise in consumption may have been the most effective political demonstration in Israel in recent years. It proved that in daily life, consumers are much more flexible and optimistic than their national and military leadership.
That doesn’t mean, of course, that consumers are knowledgeable or wise, or that they can judge better than the politicians and the generals the possibility of maintaining a lengthy ceasefire and an effective diplomatic process. All it means is that Israel society aspires to and needs a return to quiet and ordinary daily life. It also means that overcoming the recession depends first and foremost on diplomatic and security developments. Without peace and quiet, no one in the Ministry of Finance expects a return to better days, no matter what economic policy is announced. All that must be taken into account. If the ceasefire collapses, and if we return to the pre-hudna situation, the chance of recovery in 2004 will vanish.
Published by Globes [online] - www.globes.co.il - on August 14, 2003