Is Time Working for or Against Israel?
For the first time, Israel’s country default spread (2.48 percent) — which reflects “Žthe risk premium on government bonds — is similar to that of the U.S. “Ž”Ž(2.38 percent).
The trend of Israel’s economy from 1948 until today has reaffirmed that time “Žhas been working for, not against, Israel. Moreover, the ongoing “Žwar, terrorism, international pressure and boycotts, which have challenged “ŽIsrael since its establishment in 1948, have been exposed — in retrospect — “Žas bumps and hurdles on the road to unprecedented economic growth.”Ž
The sustained, impressive growth of Israel’s economy throughout “Žthe last 30 years — in defiance of endemic geopolitical and military “Žadversity — is documented in an August 2014 study by Dr. Adam Reuter, “Žthe CEO of Financial Immunities Consulting and the chairman of Reuter-“ŽMaydan Investment House.
Israel’s gross domestic product catapulted from “Ž”Ž$30 billion in 1984 to $300 billion in 2014; per capita GDP surged from $7,000 to “Ž”Ž$38,000; the public debt to GDP ratio shrank from 280 percent to 66 percent; the external “Žpublic debt to GDP ratio contracted from 55 percent to 10 percent; the budget deficit to “ŽGDP ratio decreased from 17 percent to 3 percent; the defense budget reduced from “Ž”Ž20 percent to 6 percent; annual inflation collapsed from 450 percent to 1 percent; the foreign “Žexchange reserves swelled from $3 billion to $89 billion; exports rose from $10 billion to “Ž”Ž$90 billion; high tech exports expanded from $1 billion to $28 billion; research and “Ždevelopment expenditures to GDP ratio grew from 1.3 percent to 4.2 percent; the “Žpopulation of Israel grew from 4.1 million to 8.2 million, etc. The growth “Žfrom 1948 is even more impressive: a 2000 percent growth in GDP, from $1.5 billion to “Ž$300 billion.”Ž
Assessing the impact of the Gaza war on Israel’s economy against the “Žbackdrop of the three previous wars — 2006 against Lebanon’s Hezbollah “Žand 2009 and 2012 against Gaza’s Hamas — demonstrates an exceptional “Žcapability to bounce back rapidly, except for the gradual recovery of “Žtourism, which accounts for 2 percent of Israel’s GDP. “ŽThe pattern of crisis-to-recovery has always featured an abrupt and short-“Žlived crisis followed by a speedy — not a prolonged — recovery (a “V” and not “Ža “U” shaped graph).”Ž
For example, according to the Bank of Israel, the 2006 war against “ŽHezbollah triggered an immediate drop of GDP from more than 6 percent to a “Žnegative growth of 1.5 percent, followed by a swift recovery to almost 10 percent “Žgrowth in the following quarter (prior to the global economic meltdown). The “Žeffects of the 2009 and 2012 wars were significantly more moderate, but “Žrecovery was as rapid. “Ž
The 2014 Gaza war is estimated to lower Israel’s 2014 GDP by 0.5 percent. Based “Žon recent precedents, it will have insignificant influence on foreign investors, “Žmost of whom seek the know-how-intensive Israeli high tech companies, “Žwhich are minimally vulnerable to rocket and missile fire. Moreover, the “Žexpanded global interest in Israeli-developed and manufactured, battle-“Žtested defense systems (e.g., Iron Dome, Trophy, etc.) — which “Ždemonstrated their unique capabilities during the Gaza war — is expected to “Žbolster a quick recovery and the continued growth of Israel’s economy. “Ž
In 2014, Israel is the world’s top exporter of drones, the world’s co-leader “Ž”Ž(along with the U.S.) in the development, manufacturing and launching of “Žsmall and medium sized satellites, the second-largest cyber exporter in the world — “Ž”Ž$3 billion in 2013, 5 percent of total exports and three times larger than Britain’s, as “Žwell as an emerging natural gas power.
The February 2014 International Monetary Fund Israel “ŽCountry Report stated: “Israel has been exposed to a series of shocks, “Žincluding the global crisis and heightened geopolitical tensions in the Middle “ŽEast. Nevertheless, GDP growth has averaged 4 percent over the past 5 years, “Žcompared with 0.7 percent on average for OECD countries. Per capita GDP grows “Žmore rapidly than in other OECD countries.”
The three leading credit “Žrating companies, Standard & Poor’s, Moody’s and Fitch reaffirmed “ŽIsrael’s high credit rating, emphasizing its fiscal responsibility, economic “Ždynamism and resilience, while lowering the credit rating of many developed “Žeconomies. According to the OECD annual 2013 report, Israel is the fourth most attractive country for foreign direct investment per GDP — 4 percent, “Žcompared to 1.6 percent in the top 16 economies. Warren Buffett attests to that “Ždistinction: “Israel is the leading, largest and most promising investment “Žhub outside the United States.”
In addition, leading U.S. venture capital “Žfunds established Israel-dedicated funds, and over 250 leading U.S. high tech “Žcompanies established research and development centers in Israel, “Žleveraging Israel’s brainpower, which has become a chief pipeline of cutting “Žedge technologies; thus, expanding U.S. employment, research and “Ždevelopment and exports. Intel’s recent decision to invest $6 billion in “Župgrading one of its six Israeli facilities represents the confidence of the “Žglobal high tech community in Israel’s long term viability.”Ž
In contrast to those who wish to boycott Israel, 2013-2014 has highlighted “ŽIsrael’s expanding trade and investment global network, especially with the “Žsurging economies of China, India and South Korea.”Ž
Is time working for or against Israel? The economic indicators from “Ž”Ž1948 until today confirm that Israel has experienced splendid economic “Žintegration and unprecedented economic growth, in defiance of ongoing “Žwar, terrorism, boycotts and international pressure.”Ž
This article was originally published by Israel Hayom.