The Israeli Economy Continues to Be a Massive Success Story

A recent Reuters article by Steven Scheer about the financial health of Israel made me sit-up and take notice. The article claims that the Israeli economy is performing better than expected, especially in light of the political turmoil due to the Netanyahu government’s judicial overhaul agenda.

Liam Peach, of the economic research firm Capital Economics, says that Israel’s gross domestic product (GDP) continues to grow, in line with its pre-pandemic trend. Based on GDP results for April, May and June, as well as other values such a low joblessness (3.6%) and decreasing inflation, Peach predicts that the Israeli economy will grow by 3.3 percent in 2023.

While this is a reduction from the extraordinary 6.5% rate for 2022, it is better than the results for most developed countries. For example, Canada’s economy shows signs of slowing down, with predicted GDP growth for 2023 downgraded to 1.5 %. Moreover, Peach predicts that the impact on the Israeli economy from the judicial reform controversy will remain limited.

Compared to the rest of the world, Israeli is doing well economically.

According to the International Monetary Fund (IMF), the per capita GDP of Israel is 18th in the world, above that of Canada, the UK, and New Zealand, while the total GDP for Israel will reach an impressive $564 billion by the end of 2023.

So why have there been so many articles predicting gloom and doom as far as the Israeli economy is concerned?

A Los Angeles Times article in July of this year, by Melanie Lidman and Tracy Wilkinson, titled “Government Crisis Hitting Israel’s Once Flourishing Economy,” is just one example of many.

In fact, the growth of the Israeli economy has defied expectations for decades.

Economic theory stresses that security is necessary for economic success. Yet Israel’s numerous wars, attacks from terrorists, economic boycotts, and its isolation from its neighbors, have not prevented it from creating a strong, modern, and diversified economy, along with a sophisticated array of social programs that provide effective health and educational services to its citizens. More than 400 of the world’s multi-national technology companies have research and development (R&D) centers in Israel.

To be sure, there are still economic challenges left for Israelis to deal with. Economic success in the Jewish State has coincided with a high cost of living, one of the highest in the world, and this has exacerbated the contrast between the haves and the have-nots.

Reducing Israel’s income disparity, which is second only to the US among OECD nations, should be — if it is not already — a high Israeli priority.

I also don’t want to trivialize the political situation in Israel. The effort by the current government to limit the power of the judiciary is an issue with far reaching implications. My own view is that an independent judiciary is very important, and that the concerns of the protesters are legitimate. However, those in favor of some judicial reform have valid concerns, and I hope the opposing sides will find a way to move forward and come up with a solution satisfactory to most Israelis.

Predictions about the collapse and demise of the Jewish state are not new. There have been many, some going back to 1947, before the state existed. Obviously, none of them materialized.

Instead, the achievements of the State of Israel over the past 75 years, including in the field of economics, have been remarkable, and there is every reason to believe that Israel’s economy will continue to flourish and grow.

Jacob Sivak, a Fellow of the Royal Society of Canada, is a retired professor, who taught at the University of Waterloo.

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