Israeli economy: growth or slowing down

Israel’s business climate worsened moderately in the second quarter as uncertainty in global markets and Europe’s debt crisis affected the risk level of local companies, Business Data Israel reported Sunday.

Not very optimistic. In the second quarter of 2010, exports were lower by 2.5%. There are clear concerns that the economy is slowing down, especially has Europe struggles to emerge from the credit crisis. Even foreign investment is falling off.

At this point, it is worth taking a breath and pausing for thought. The Israeli economy is still perfoming well, with growth at around 3.5%. It is just that this is not as high as predicted or hoped for.

Trade delegations are still popping over in quantity. I was chatting to a member of a team from Colorado. Amongst several opportunities, he was looking at further gas exploration. For him, what has been discovered in the Tamar field is just the beginning of a long story. The net result will be a massive positive shift in Israel’s balance of payments, and probably with geopolitical fall out as well.

Now consider that Israel appears to have a central budget and inflation under control. Unemployment is at 6.5% and dropping. And when you factor in the expected investments resulting from OECD membership and the Tel Aviv Stock Exchange joining the leading MSCI index, the long term future looks very healthy.

Yes , there are still concerns. Despite a recent weakening, the shekel remains strong against leading currencies, which harms profitability. And, as many have written, the high tech environment demands systematic restructuring; too much emphasis on the wrong technologies.

So, what’s the wrap up? The short term is unlikely to produce any exciting stats. But this is not an indication of a recession. The year 2011 is still looking good.

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2 Comments on “Israeli economy: growth or slowing down”

  1. […] there may be a need to move the local debate along. Today, Israel’s high tech sector needs help to reposition itself. The ultra orthodox and minority communities are not […]

  2. […] Despite current hick-ups, the Israeli economy remains a strong bet for the long term. As I have mentioned before, there will be significant financial and structural benefits from the discovery of […]

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