Israeli Finance Minister: Economy Can and Should Be Growing at 5 Percent Annually

Moshe Kahlon says he's seeking to lure multinationals, expat Israelis to country to help boost growth.

Finance Minister Moshe Kahlon with TheMarker editor-in-chief Sami Peretz at TheMarker Socioeconimic Conference, November 22, 2016.
Ofer Vaknin

Finance Minister Moshe Kahlon told TheMarker Socioeconomic Conference on Tuesday that Israel’s economy can and should reach a growth rate of 5% annually, quite a lot faster than it is growing now.

“We have to reach a rate of growth of 5% and at the end of the day we’ll reach it, gradually,” Kahlon said in an interview with TheMarker editor-in-chief Sami Peretz. At 4.9%, gross domestic product came close to Kahlon’s target in the second quarter, but economists are generally expecting the economy to expand about 3% this year and 3.5% in 2017.

Kahlon didn’t offer a comprehensive package of measures to boost economic growth, but said the steps he was taking were meant to lure multinational companies to Israel and bring back talented Israelis who are living and working abroad.

“It’s working – we’re being praised all over the world. Our representatives are coming back from Silicon Valley and say the first language there is Hebrew. We’re making a major effort to bring back Hebrew speakers,” he said.

He also promised to reduce regulations on business and reduce taxes on small businesses and the middle class, which he defined as people earning less than 18,000 shekels ($4,660) a month.

On the matter of rising home prices – which Kahlon has adopted as his flagship cause – he declined to promise they would be lower by the end of his term as finance minister.

“I never committed to anything regarding prices and I won’t do that now. I am nearly certain that the moment we have completed all the undertakings we are engaged in the problem will be solved. When we’ve reduced demand and created supply, it will have an impact on the market,” Kahlon said.

He defended his controversial plan to impose taxes on people owning three or more homes as a way of deterring residential-property investors and freeing up more homes for people who are buying them to live in.

“Sometimes there’s a situation where groups of people do something without malice but at a certain point it hurts another groups,” he said about property investors. “Today, people who own a lot of properties and there are others who have none. We want to pressure them [the former] to either pay the tax or free up apartments for young couples.”

On the controversy over public broadcasting, Kahlon seemed to take a tougher line than earlier this month. Prime Minister Benjamin Netanyahu is trying to block the new public broadcasting corporation, Kan, from going on the air and keep alive the Israel Broadcasting Authority it is supposed to replace.

But on Tuesday Kahlon said he didn’t think the prime minster would get his wish. “The public broadcasting corporation will launch. I don’t see how the IBA can continue to operate,” he said, pledging he would not allow the government to spend extra money keeping it open.