The Bottom Line / Don't panic
The flood of economic events resulting from the difficult security situation leaves no room for doubt: the economy is worsening, and at this stage it is difficult to see when things will stabilize, not to say recover.
The flood of economic events resulting from the difficult security situation leaves no room for doubt: the economy is worsening, and at this stage it is difficult to see when things will stabilize, not to say recover. Foreign investors are withdrawing their investments here, foreign businessmen who flooded Israel in the high-tech boom years have disappeared, tourism is at an unprecedented low, shopping malls and commercial centers are empty, defense expenses are soaring and the levels of the major stock exchange indexes reflect all of this.
The deterioration in the economic situation is a direct result of several processes, but it is primarily the result of the global economic crisis and the Israeli-Palestinian conflict.
These two processes have accompanied us for the past year-and-a-half and are no longer a surprise. What is new is the pressure under which Israeli policy has been operating since the outset of the Protective Wall operation, which was launched following the terrorist attack at Netanaya's Park Hotel on Passover eve.
The increasing number of threats to cut off, tone down or re-evaluate connections with Israeli companies undoubtedly are of great concern to those who would be affected by such measures. However, managers of companies can do little but wait with the rest of the country until the security situation calms down, something that should ease the pressure. While television screens around the world report incessantly on the war in the territories, no marketing steps taken by the captains of the economy will avail; these initiatives should be left for quieter times.
However, domestically there is a lot that can be done, and the fear is that the difficult situation will make the decision-makers panic. Now is the time to state that despite all the difficulties, the foundations of the Israeli economy are firm, and although per capita production is on the decline, it is still 3 to 10 times greater than neighboring nations. To guard these foundations, certain adjustments must be made - some of them painful - but they will, in the end, enable us to overcome this difficult period.
Panic will lead to either complete paralysis or hasty decisions. For example, it is quite clear that a war levy, if it is not part of a package of other steps, will only aggravate the recession.
If the budget is left as is, without the necessary adjustments required as a result of the expected deficit, the economy will slide to a new low.
What is needed at this stage is for economic and political forces to draft all their resources, each contributing its part, to face up to the situation that has been created. Parliamentarians will need to give up on costly private legislation, government offices will have to suffice with reduced budgets and preferential sectors, such as residents of the Negev and settlers, will, for the present, have to give up their extensive tax benefits.
Public sector workers will have to accept wage freezes, and even wage cuts, which have been the lot of the private sector for several months now.
The main difficulty in taking decisions in the current situation is the fact that every concession at this stage looks like a permanent step.
Therefore, and in order to make it easier to take the necessary steps, apparatuses should be set up to enable the reinstatement of benefits that are taken away - when the situation improves.