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Israel’s economy Continues To Grow. Is It Counter-Intuitive? By Sherwin Pomerantz

Israel’s Central Bureau of Statistics late last week released a report indicating that the country’s economy grew by 3.2% in the second quarter of this year, an increase of the prior quarter’s figure of 2.8%.  One of the prime factors in this growth was a 10.3% annualized growth rate of Israel’s exports and a 5.4% rise in personal expenditures.

On the surface this seems to be counter-intuitive.  It would have been reasonable to expect, for example, that the slowdown in the economies of the US and Europe, two of Israel’s largest export destinations, would have a negative ripple effect on our economy here.   In addition, the constant dialogue in the press, both locally and internationally, about the possible run up to war with Iran would also be expected to dampen economic growth.  And yet the growth rate increased, clearly counter intuitively.

These figures do not reflect what was expected to be a downturn in July and August (i.e. the 3rd quarter of the year) and even with this growth the economy, overall, is going through a contraction relative to 2011.  On the positive side however, Israel in 2012 will have its best year ever as a tourist destination.  Hotels are running close to capacity, measurements of the population here show high levels of happiness and satisfaction, unemployment remains relatively low and foreign direct investment continues unabated.  So what is really going on?

Nobody, of course, is endowed with the gift of prophecy when it comes to economic forecasting or anything else but thriving businesses generally look at the long term when making their investment plans, rather than short term blips in the market.  If one looks, for example, at the mission of the Coca-Cola Company, the very first statement they make is “To continue to thrive as a business over the next ten years and beyond, we must look ahead, understand the trends and forces that will shape our business in the future and move swiftly to prepare for what’s to come….. our 2020 Vision…creates a long-term destination for our business.”

Israel, of course, is also seen as a very resilient community quite practiced in dealing with the idiosyncratic issues unique to this socio-political environment.  For example, during the Gulf War in 1990-1991 Intel Israel, the largest overseas employer in the country, did not suffer the loss of even one day of production.  The fact that this economy continues to grow is testimony to the faith that the business community has in Israel’s long term viability in spite of the recent global economic slowdown and the ever present military threats.

Predicting the future is always risky and all of us believe that we are basing our decisions on facts.  But as Malcolm Forbes once said “Anyone who says businessmen deal in facts, not fiction, has never read old five year projections.”

Sherwin Pomerantz is president of Atid-EDI Ltd., a Jerusalem-based economic development consulting group with 20 years’ experience in assisting overseas companies and public entities in their export promotion and business development efforts.  

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Posted by on August 22, 2012. Filed under Israeli News,Slider. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.