Here are several things that happened during the second quarter of the year, when Ministry of Finance Yair Lapid was busy promoting his plan for 0% VAT on apartment purchases from a contractor: the Israel economy grew at a 1.7% clip, private consumption stagnated, investment fell, and exports plunged by an annualized rate of almost 18%.
Indeed under the leadership of Lapid and Prime Minister Benjamin Netanyahu, the Israeli economy is rapidly approaching a recession, while its industrial base is eroding and investment in resident construction is declining. This happened before the war in Gaza, before the Minister of Finance declared that the economy was strong enough to contain the results of the war, before entire sectors had to absorb war damage by themselves, before businesses in southern Israel were paralyzed, while those in central Israel reported a sharp drop in demand.
When the third quarter figures are published, the numbers will be worse. Growth may be negligible, or even negative, and could serve as a warning to the country’s economic leadership. The Israeli economy is not “strong”; it has weakened in recent years, to a large extent because of a passive policy, two-year budgets, and ministers of finance who do not exactly understand what their job and duty consist of.
The ministry of finance and prime minister now want to talk about a “resilient country,” about “strength,” and about “standing together.” The problem is that the second quarter figures are neither an accident, nor a short-term phenomenon. The destruction of the industrial base has been going on for a long time. The drop in the purchasing power of households began before this year.
Israel takes pride in being a “startup nation,” and that is how it is marketed to its people and to the entire world. Someone in the Ministry of Finance should explain to the minister, in simple language, so he can understand, the meaning of the figures being published month after month, quarter after quarter: we are becoming an economy and a society in which there is an high-tech and financial elite, with very large groups of workers beneath it whose entire employment horizon is rapidly shrinking. Job security for these employees ceased to be a consideration a long time ago, and many of them will become workers for contractors in the near future.
The Minister of Finance should not being doing battle on behalf of 0% VAT, and campaigns glorifying the culture of exits are not what we need. Israel desperately needs a different economic leadership that will think about economic growth whose benefits can be enjoyed by its citizens - a leadership that will regard industry and exports with more than indifference and apathy, a leadership that will see figures like those published by the Central Bureau of Statistics and realize the depth of the crisis we are in.
Published by Globes [online], Israel business news - www.globes-online.com - on August 17, 2014
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