2012 Was a Wasted Year for Israel’s Economy

Moti Bassok
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Moti Bassok

The year 2012 was a wasted year for the Israeli economy.

Officials at the Finance Ministry and Bank of Israel, and in the business and academic communities, already understood at the outset than the country needed a new annual budget and that the 2011-2012 two-year budget didn’t provide an adequate response to changes underway in the world and Israeli economies as early as in 2011. But Finance Minister Yuval Steinitz and some of the treasury’s chief economists preferred sticking to their two-year budget.

By mid-year even the last of the treasury’s economists understood that the budget no longer fit the economy’s needs on either end: revenues or expenditures. And so a major fix was made to the 2012 budget, but just to the revenues side. The prime minister and the treasury brass, for reasons they kept to themselves (probably fear of the upcoming election), didn’t have the guts to also make sharp repairs on the expenditures side.

The fruits of this mistake will cost us all dearly through the 2013 budget. The dreadfully disappointing economic figures for the second half of 2012, published yesterday by the Central Bureau of Statistics, spark a deep longing for the very positive indicators from 2010 and 2011. But they also arouse intense anger against the economic leadership Benjamin Netanyahu and Steinitz first and foremost who didn’t strive to put the economy back on the right budgetary footing.

What we can hope will be done in mid-2013 should have been done in mid-2012. Rather than being on the road to rehabilitation, the economy is falling apart. With nothing astir to fix or improve matters, we continue living with the 2012 budget that wasn’t even right for last year.

The numbers showing economic decline are more potent than 1,000 words. The economy grew just 3.3% in 2012 compared to 4.6% in 2011 and 5% in 2010. In the last quarter of 2012 the economy grew just 2.5% on an annual basis, compared with 7.2% in the last quarter of 2010. The downturn is clearly discernible.

The central bank released a frightening report last week on the state of the economy and what might happen if we continue following the 2012 budget. The problems are well known, as well as what needs to be done to solve them. But our elected officials have time as they sit and wait for a coalition to form, cabinet posts to be handed out, and a decision on who will be the next finance minister and meanwhile do nothing.

The 2012 budget continues to work in the wrong direction. The treasury wants to do something, and its budget division is ready to get started when given the word. But in the meantime the system lies motionless, just sitting and waiting. But time isn’t on our side and the problems are only getting worse. Nobody will be shocked in three months when the data on the economy are even gloomier.

Yuval Steinitz.Credit: Flash 90