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December 27, 2014 / 5 Tevet, 5775
 
At a Glance

Posts Tagged ‘economy’

Israel’s Economy: Stunned But Still Strong

Monday, September 1st, 2014

Despite the numerous setbacks suffered in Operation Protective Edge, Israel’s economy remains resilient. Amid news of massive budget cuts needed to pay for the latest war and losses to the tourism and retail industries, statistics from many sources project a rapid economic recovery and continued growth of one of the world’s most vibrant small economies.

The war in Gaza has taken a significant economic toll on Israel, felt most sharply by the tourism sector, which comprises some 7 percent of Israel’s economic activity. Israel’s Ministry of Tourism reported that tourism for July dropped by 26 percent from the same period last year, representing a loss of at least $566 million.

Hardest-hit from the ongoing war are the businesses in the south of the country, where the majority of the Hamas rockets hit. Stores and restaurants have suffered from a drop in sales, while manufacturing facilities close to the Gaza border have been impacted by slowdowns in manufacturing due to incessant rocket alerts.

Israel’s Manufacturers Association estimated the total economic impact on Israeli manufacturers for the first round of the conflict at about 1.2 billion shekels.

A number of economic studies indicate, however, that these setbacks are likely to be temporary, with the overall forecast for the country remaining positive. In a study published in early August, Dr. Adam Reuter, former senior officer at the Bank of Israel and the head of several investment firms, found that over the last 30 years Israel’s economy has enjoyed vigorous and sustained growth that continues to this day.

Between 1984 and 2014, Israel’s gross domestic product (GDP) increased tenfold from ‎‎$30 billion to $300 billion, while per-capita GDP rose from $7,000 to ‎‎$38,000. Negative indicators fell likewise: The public debt-to-GDP ratio shrank from 280 percent to 66 percent, the external ‎public debt-to-GDP ratio fell from 55 percent to 10 percent, and the budget deficit-to-‎GDP ratio declined from 17 percent to 3 percent.

Over the same time period the defense budget as a percentage of the GDP went down from ‎‎20 percent to 6 percent, and annual inflation plummeted from 450 percent to 1 percent.

Further numbers from this study reveal Israel’s impressive performance in the global market: Foreign ‎exchange reserves rose from $3 billion to $89 billion, and annual exports climbed from $10 billion to ‎‎$90 billion, of which hi-tech exports accounted for $28 billion in the last year compared to just $1 billion 30 years ago.

The recent war in Gaza is not expected to inflict any lasting damage on economic performance, noted Yoram Ettinger, a former ambassador for Israel and a longtime consultant to the Israeli government. In all three previous wars – the 2006 Lebanon War and the previous two operations in Gaza in 2009 and 2012 – the reaction of the economy has been one of brief downturn followed by rapid and complete recovery, “a ‘V’ and not ‎a ‘U’ shaped graph,” Ettinger wrote in a letter published last week.

The consultant noted that according to the Bank of Israel, “the 2006 war against ‎Hezbollah triggered an immediate drop of GDP from more than 6 percent to a ‎negative growth of 1.5 percent, followed by a swift recovery to almost 10 percent ‎growth in the following quarter.”

Operation Protective Edge is expected to lower Israel’s 2014 GDP by 0.5%, but will likely have “insignificant influence on foreign investors, most of whom seek Israeli high-tech companies, which are minimally vulnerable to rocket and missile fire,” he added. With the Israeli military’s emphasis on minimizing civilian casualties and its focus on defensive rather than offensive technologies, the economy may even receive an incidental benefit from the war: “The ‎expanded global interest in Israeli-developed and manufactured, battle-‎tested defense systems (e.g., Iron Dome, Trophy, etc.) – which ‎demonstrated their unique capabilities during the Gaza war – is expected to ‎bolster a quick recovery and the continued growth of Israel’s economy,” Ettinger explained.

Summer of War: The Cost of the Conflict on Israel

Monday, August 25th, 2014

The nearly two-month-long conflict with Hamas that has taken an economic toll on Israel, In addition to the military expenditures from Operation Protective Edge, physical damage to commercial facilities and the financial impact on industries such as retail and tourism have dragged the country into an economic slump, while the psychological cost on the children growing up in the south will take years to assess.

Nearly 3,000 claims for damage have been submitted to the Israel Tax Authority, which has so far paid some $20 million for direct damages and another $21 million for missed work days and other indirect damage. According to existing laws, workers in businesses located within 40 kilometers from the Gaza border get paid for the days they are absent from work, and their employers are eligible for full compensation from the government for these wages.

Israel’s Ministry of Tourism reports that tourism for July dropped by 26 percent from the same period last year. The sector, comprising about 7 percent of the Israeli economy, has lost at least $566 million, according to the figures.

The hardest-hit from the ongoing war are the businesses in the south of the country, which has sustained the bulk of the rocket fire from Hamas. Stores and restaurants have suffered from a drop in sales, while manufacturing facilities close to the Gaza border have been impacted by slowdowns in manufacturing due to incessant rocket alerts.

Israel’s Manufacturers Association estimated the total economic impact on Israeli manufacturers for the first round of the conflict at about 1.2 billion shekels, with factories in the south accounting for 40 percent of this figure, and facilities in Haifa and the center of the country incurring half the losses.

The agricultural sector has also experienced significant physical damage from the falling projectiles. Since the Iron Dome system is only activated when there is a projectile headed for a built-up area, thousands of rockets and mortars have landed in open fields, many of them belonging to farms. In addition to crop damage, there have been a number of incidents of injury and death of cattle, chickens and other livestock as a result of rocket impacts.

In an effort to assist businesses hurt by the conflict, Tourism Minister Uzi Landau proposed a tax exemption to Gaza-adjacent communities in the south. The move would be part of a comprehensive aid package consisting of tax breaks as well as reparations.

The latest war with Hamas came at a time when the Israeli economy was already in a slowdown, with a strong shekel decreasing exports and growth for the second quarter of 2014 falling to 1.7 percent from 2.8 percent in the first quarter. In response, the Bank of Israel decided on July 28 to cut its benchmark interest rate to a five-year low of 0.5 percent.

“We assess that economic activity is experiencing a sort of contraction, that began before the start of the Gaza operation,” the bank said Aug. 18. “This contraction will worsen in the current quarter, although some degree of rebound can be expected as soon as the hostilities cease.”

Israel Gears Up for Post-War Economic Challenge

Monday, August 11th, 2014

Israel will face a challenge getting the economy back on track after the war is over, but the ‘startup nation’ is nothing if not resourceful.

At the start of the month, MK Ofer Shelah – a member of the Knesset Finance Committee, told Reuters that Operation Protective Edge was “definitely going to cost more than NIS 10 billion ($2.9 billion).”

The loss of summer tourism income was projected to be more than NIS 2.2 billion, including some NIS 500 million from empty rooms at hotels. Many tourists canceled trips within the country due to missile attacks; foreign airlines canceled flights for several days due to the FAA flight ban that followed a single rocket aimed at a town near the airport.

Likewise, the Israel Manufacturers’ Association estimated drop in production at some NIS 820 million. The figure results from workers staying home due to missile attacks, due to others being called up for reservist duty, leading to a loss in production, and from damage to factories in missile attacks.

However, Michael Sarel, former chief economist at the Finance Ministry, was optimistic. He pointed out that “if it will be completely quiet” as it was after the last three operations were over, “the economy has proved it is quite resilient to these kinds of shocks and the impact will be only one quarter.”

Emergency Measures to Assist Residents of South

Thursday, July 24th, 2014

The Agency for Small and Mid-Sized Enterprises at the Ministry of the Economy has announced an emergency plan to assist businesses in war-battered southern communities.

The plan includes special assistance programs for small and mid-sized enterprises in the south, assistance in obtaining money from the property compensation fund, business advice and advice for obtaining financing from funds.  

The special benefits will be available to small businesses up to 40 km from the Gaza border, who will receive fee exemption and expedited treatment. The program will be administered by the Maof network . Services will include 
  *   Assistance in obtaining compensation from property tax – a new service to help enterprises navigate the bureaucracy at the Tax Authority, including filling out forms.
  *   Expert advice and business and marketing consultancy – eligibility for up to 20 extra hours of business consultancy.
  *   Special emergency guidance for businesspeople – led by experts and fully financed by the Agency on subjects related to the emergency situation (financing, labor law, cash flow, etc.)
  *   Advice for obtaining financing from funds – funds which have activated programs for this zone. The advice will help businesspeople fill out the necessary forms of a fund. The service is free.

In addition, the ministries of finance and the economy announced a special supplement of NIS 100 million to a loan-guarantee program for small- and mid-sized businesses in the Gaza Belt region. The program ensures government-backing for business loans in the area. Lastly, representatives of the agencies coordinating the government-back loans will be available to meet businesspeople at Maof offices in Ashdod, Ashkelon, Beersheva, and Sderot. The Agency states that businesspeople from the confrontation zone seeking assistance will be exempt from the NIS 250 registration fee and that applications will be handled expeditiously, taking nine days instead of the month required in normal times.

Minister of the Economy Naftali Bennett commented, “We are also supporting the soldiers on the economic front. Economic soundness and ensuring financial security of businesses in the south is a critical part of the strength of residents of the south. We are taking steps to support businesspeople and ensure their stability immediately, and we will continue to do so after Operation Protective Edge is over.”

For more information, residents of the eligible areas can telephone 1-700-558-040, or visit the Agency for Small and Mid-Sized Enterprise website at www.sba.economy.gov.il.

Emergency Economy Ministry Hotline

Thursday, July 10th, 2014

The Economy Ministry has opened a hotline in view of the situation in southern Israel.

For those who need it for any reason, the number in Israel is: 1-800-800-556.

Israel to Vacate ‘All’ IDF Bases in Central Region

Tuesday, June 3rd, 2014

Israel plans to vacate all its bases in the central region in the coming months, according to Harel Locker, director-general of the Prime Minister’s Office, who has been tasked with the goal in order to streamline the military system.

Locker made the statement at Tuesday’s Globes-BDO Ziv Haft Capital Market Conference, saying budget cuts for the defense establishment had forced the move.

Last week the IDF warned it was halting air force training and non-active flights, as well as all non-active training programs for career and reserve personnel due to the budget cuts imposed by Finance Minister Yair Lapid (Yesh Atid.) The drastic measures came following the ministry’s refusal to infuse additional funds into defense coffers which had already been approved in a special vote by the Cabinet in October. The squabble over funds comes at a time when a new unity government between the Fatah-led Palestinian Authority and the Hamas terrorist organization has been re-established under the PLO in Judea, Samaria and Gaza, and terrorism against Israel is on the rise on both sides of the 1949 Armistice line (also known as the “Green Line” or “pre-1967″ line.)

“All of the land on which IDF bases between Haifa and Be’er Sheva” are located would be up for sale, Locker said – effectively raising money for defense through the capital markets rather than earmarking funds in the state budget.

“This sort of government investment will contribute to economic activity in the market. It will also free up land for more than 100,000 housing units in high-demand areas in central Israel,” he noted.

In addition, Locker claimed the move towards the northern and southern periphery would boost the economy in those areas. “Tens of thousands of career officers and soldiers will work, live, buy and enrich” those regions, he claimed.

However, so far the move by the air force to the periphery doesn’t seem to have done much other than create havoc on roads in the south that were never built to accommodate the increased amount of traffic. The construction project to widen and develop the area around the Nevatim air force base, meanwhile – particularly the reconstruction of Route 31 from the Shoqet Junction near Be’er Sheva to Arad – has turned the entire northeastern Negev upside down for more than a year, with little to show for it other than more vehicular accidents.

Locker said the state would fund the project through sales of the land on which the bases are now located – “the most expensive lands in high demand areas… for tens of billions of shekels.” He said he was turning to the business community gathered at the conference for extra-budgetary financing of the project – “financial institutions, banks and other entities.” He added that he hoped to complete the process “within a few weeks.”

Killing Cash

Tuesday, May 27th, 2014

The Israeli government hopes to put the kabash on cash transactions, starting with a plan that places a ceiling on the amounts starting in fiscal 2015 budget.

The director-general of the Prime Minister’s Office, Harel Locker told journalists in a briefing at the beginning of this week the government plans to limit cash transactions between businesses to NIS 5,000 after a one-year period, with the initial phase to begin at just NIS 7,500. Private citizens will be allowed cash transactions of up to NIS 15,000. But if the legislation goes through, the use of checks will also be restricted.

The initiative is aimed at ending the “black economy” that operates in much of the country, Locker explained, adding that  money laundering has risen over the past two years. He pointed to some three million cash transactions, each of which was more than NIS 5,000, that totaled some NIS 273 billion since 2012, as proof that things have to change.

The government, said Locker, has instead decided to take a leaf from the American notebook and is recommending that banks issue debit cards, rather than the VISA and MasterCard credit cards they currently use.

Most Israelis do not carry out transactions for more than NIS 5,000, Locker contended, thus he said it is expected the new plan will not cause difficulties for most of the population.

Nice and tidy — but that may not be the case: newlyweds who are buying furniture and other necessities for new homes often make their purchases with the cash gifts they receive at their wedding. Those shopping sprees are seldom carried out for less than NIS 10,000 and often involve the use of cash for extra bonus points or discount savings.

Other special events and holiday sales also often involve cash purchases as well – a fact the government seems not to be taking into account. Although Locker said he expects approval of the new law by the end of 2014, it is likely there will be more than a few bumps along the way – probably after his colleagues’ spouses find they find they can no longer go shopping without the government getting in the way.

But mostly, this is about too much government intrusion into the private lives and transactions of its citizens, by a government which wants to, invasively, be able to more easily track its citizens down to the smallest detail.

What’s next? Our biometric data on file with the government?

 

Printed from: http://www.jewishpress.com/news/breaking-news/government-hopes-to-limit-cash-flow-in-israel/2014/05/27/

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