Analysis / A man to congratulate
It's now official - the economy will grow 4 percent this year, following a three-year recession, and Finance Minister Benjamin Netanyahu can say: I told you so. I promised growth and I kept my promise.
It's now official - the economy will grow 4 percent this year, following a three-year recession, and Finance Minister Benjamin Netanyahu can say: I told you so. I promised growth and I kept my promise. And not only is there growth, but the standard of living will rise this year by 2.7 percent. Things are looking up today, and tomorrow things will be even better.
Indeed, Netanyahu's policy has proved itself. It stopped the slide into an abyss, and it extricated the economy from the pit in which it found itself. Some 18 months ago, it was impossible to secure a one-dollar loan abroad, interest rates were sky-high, the bourse was at a low, and there were fears a big bank would collapse and drag the entire economy down with it into a financial crisis.
Netanyahu stepped in and presented an alternative economic policy, a free-market policy, a policy of increased competition, of a reduction in government spending, of lowering taxes, of reforms and privatization, of cutting National Insurance allowances and encouraging people to go out to work.
He took flak from all sides (and continues to do so), but led the economy toward a 4 percent growth rate nevertheless - a vast improvement on the previous three years.
But are we talking about durable growth? Will the situation be even better next year?
One can't say for certain. The first half of the year apparently was better than the second half. In other words, the pace of the growth is slowing - and that's a bad sign. Had the pace of the first half of the year been maintained, annual growth would have been 4.7 percent and not 4 percent. But even that wouldn't be enough, because to combat the unemployment and poverty, the economy needs a growth rate of 5-6 percent.
There's another bad sign - the investments. To enjoy stable and prolonged growth, investments must increase; another factory must be built, another office block, another house, another production line; more trucks must be bought, and more equipment too. Till now, however, all the growth has stemmed from existing capital, without new investments. Moreover, and worse so, investments in fixed assets dropped this year by 0.3 percent. Yes, they fell by more over the previous two years, but that's scant solace.
Sticking strictly to the budget and implementing all the reforms won't take the economy to a growth rate of 5-6 percent because to encourage foreign investments on a large scale, to bring back the tourists and create a mood of stability, there is need for a political plan.
And here the political Netanyahu is at odds with the economic Netanyahu. He is against the disengagement, and is thus preventing significant economic growth, without which it will be impossible to reduce unemployment, bridge the socioeconomic gaps and fight poverty.