Stanley Fisher, Bank of Israel Governor, Assesses Israel’s Economy
Straight from the Jerusalem Boardroom #178, April 26, 2013
The following summary of the April 23, 2013 address by Stanley Fisher, Bank of Israel Governor, highlights economic indicators which reflect the relative strength of Israel’s economy during the global economic meltdown. These indicators have enhanced global confidence in the long-term viability of Israel’s economy. Far from being isolated, Israel has become an attractive partner for global trade, an exciting site for astute investors and giant high tech companies. Israel’s economic performance is praised by the three leading global rating companies and the International Monetary Fund.
1. “The state of Israel’s economy is very good, not excellent as it was in recent years.”
2. In 2013, Israel’s economy is expected to grow 3.8% - more than most OECD countries. 1% growth will derive from offshore natural gas production, which will substitute more expensive imported energy, lower overall imports and production costs and expand employment.
3. Global trade is expected to expand only 3.6% during 2013, which does not bode well for Israel’s exports (40% of Israel’s GDP).
4. Unemployment – 6.5% - is the lowest in thirty years. Unemployment among the 25-64 age groups is 5.7%. Apparently, more young ultra-orthodox Jews and Arabs are integrated into the job market.
5. In 2013, the interest rate – 1.75% - attracts overseas investors in State of Israel Bonds. In 2012, inflation rate was 1.3%.
6. In 2003, Israel was burdened by more than 5% budget deficit, which increased interest paid by Israel on international borrowing. The deficit was eliminated, when Israel adhered to a balanced budget policy, which facilitated Israel’s solid economic performance during the global economic meltdown. However, the global crisis slowed down Israel’s economic growth, decreasing tax income, which increased the budget deficit to 4% in 2012. The government goal in 2013 is a 3% budget deficit.
7. During the 1970s and 1980s, the defense budget was over 20% of GDP. The impressive growth of GDP has diminished the ratio of the defense budget – which is the largest share of the national budget - to 7% of GDP in 2012, the lowest since 1954!
8. In 2003, the public debt to GDP ratio was 99.3%; in 2012 it was reduced to 73.4%.