Ambassador (ret.) Yoram Ettinger, "Second Thought: a US-Israel Initiative"
"Israel Hayom", August 29, 2014, http://bit.ly/VSkAEw
For the first time, Israel's country default spread (2.48%) – which reflects the risk premium on government bonds - is similar to that of the US (2.38%).
The
trend of Israel's economy from 1948 until today has reaffirmed that time
has been working for – and not against – Israel. Moreover, the ongoing
war, terrorism, international pressure and boycotts, which have
challenged Israel since its establishment in 1948, have been exposed –
in retrospect - as bumps and hurdles on the road to unprecedented
economic growth.
The sustained, impressive growth of Israel's economy throughout the last thirty years
– in defiance of endemic geopolitical and military adversity - is
documented in an August, 2014 study by Dr. Adam Reuter, the CEO of
Financial Immunities Consulting and the Chairman of Reuter-Maydan
Investment House. For example, Israel's GDP catapulted from $30bn in
1984 to $300bn in 2014; per capita GDP surged from $7,000 to $38,000;
public debt to GDP ratio shrunk from 280% to 66%; the external public
debt to GDP ratio contracted from 55% to 10%; the budget deficit to GDP
ratio decreased from 17% to 3%; the defense budget reduced from 20% to
6%; annual inflation collapsed from 450% to 1%; the foreign exchange
reserves swelled from $3bn to $89bn; export rose from $10bn to $90bn;
high tech exports expanded from $1bn to $28bn; research and development
expenditures to GDP ratio grew from 1.3% to 4.2%; the
population of Israel grew from 4.1 million to 8.2 million; etc.. The
growth from 1948 is even more impressive: a 2000% growth, from a $1.5bn,
to a $300bn, GDP.
Assessing
the impact of the Gaza War on Israel's economy against the backdrop of
the three previous wars – 2006 against Lebanon's Hezbollah and 2009 and
2012 against Gaza's Hamas – demonstrates an exceptional capability to
bounce back rapidly, except for the gradual recovery of tourism, which
accounts for 2% of Israel's gross domestic product (GDP). The pattern
of crisis-to-recovery has always featured an abrupt and short-lived
crisis followed by a speedy – not a prolonged – recovery (a "V" and not a
"U" shaped graph).
For example, according to the Bank of Israel,
the 2006 war against Hezbollah triggered an immediate drop of GDP from
more than 6% to a negative growth of 1.5%, followed by a swift recovery
to almost 10% growth in the following quarter (prior to the global
economic meltdown). The effects of the 2009 and 2012 wars were
significantly more moderate, but recovery was as rapid.
The
2014 Gaza War is estimated to lower Israel's 2014 GDP by 0.5%. Based on
recent precedents, it will have insignificant influence on foreign
investors, most of who seek the knowhow–intensive Israeli high tech
companies, which are minimally vulnerable to rocket and missile fire.
Moreover, the expanded global interest in Israeli-developed and
manufactured, battle-tested defense systems (e.g., the "Iron Dome,"
"Trophy," "Aqua Shield," "Point Shield," etc.) - which demonstrated
their unique capabilities during the Gaza War - is expected to bolster a
quick recovery and the continued growth of Israel's economy.
In
2014, Israel is the world's top exporter of drones, the world's
co-leader (along with the US) in the development, manufacturing and
launching of small and medium size satellites, the sixth largest
exporter of military systems, the 2nd largest cyber exporter -
$3bn in 2013, 5% of total exports and three times larger than
Britain's, as well as an emerging natural gas power.
The February, 2014 International Monetary Fund (IMF) Israel Country Report stated:
"Israel has been exposed to a series of shocks, including the global
crisis and heightened geopolitical tensions in the Middle East.
Nevertheless, GDP growth has averaged 4% over the past 5 years, compared
with 0.7% on average for OECD countries. Per capita GDP grows more
rapidly than in other OECD countries." The three leading credit rating companies,
Standard & Poor's, Moody's and Fitch reaffirmed Israel's high
credit rating, emphasizing its fiscal responsibility, economic dynamism
and resilience, while lowering the credit rating of many developed
economies. According to the OECD annual 2013 report, Israel is
the 4th most attractive country for foreign direct investment (FDI) per
GDP – 4%, compared to 1.6% in the top 16 economies. Warren
Buffett attests to that distinction: "Israel is the leading, largest
and most promising investment hub outside the United States.” In
addition, leading US venture capital funds established Israel-dedicated
funds, and over 250 leading US high tech companies established research
and development centers in Israel, leveraging Israel's brainpower, which
has become a chief pipeline of cutting edge technologies; thus,
expanding US employment, research and development and exports. Intel's
recent decision to invest $6bn in upgrading one of its six Israeli
facilities represents the confidence of the global high tech community
in Israel's long term viability.
In
contrast to those who wish to boycott Israel, 2013-14 have highlighted
Israel's expanding trade and investment global network, especially with
the surging economies of China, India and South Korea.
Is time working for or against Israel?
The economic indicators from 1948 until today confirm that Israel has
experienced splendid economic integration, and unprecedented economic
growth, in defiance of ongoing war, terrorism, boycotts and
international pressure.
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