If you haven’t already noticed the signs that the Israeli economy is in for a rough ride in the short to medium term, as the domino effect gathers momentum from European, American, and now Asian economies, now is the time to take a really hard look at where we are and what we might expect, and get a grip on reality.
Israel has enjoyed an unprecedented economic boom over the last 10 years, the last four of which have seen much of the rest of the world go through major financial crises while here we maintained growth, and living standards have, in general, risen. Fuelled by stunning rises in the value of Israeli property, all has seemed rosy under the astute management of Bank of Israel supremo Stanley Fisher. But in a global economy that is again facing serious meltdown, Israel is not an island, and will surely feel the wave of economic instability that is pouring over Europe, threatening to envelop the BRICS countries, in particular India, China and Brazil.
Having seen the awful effect the recession has had on Britain since the 2008 banking crisis and the realization that Britain and Europe will not be moving ahead at all over the next few years – despite the ill-conceived recent mind-boggling bailout of Spanish banks to the tune of more than $150 billion, a move that Fxpro.com described as “akin to giving a patient with two broken legs some morphine” – the euro crisis seems to be deepening by the minute, a disturbing thought for anyone in Israel whose job relies on exporting products to European markets.
The US, Israel’s number 1 export market, is seeing its economy stuttering after showing signs of a mild recovery, and the recent comments from the powers that be in Washington that they are ‘being dragged down by Europe’, appear to a foretaste of the blame game that will be coming our way very soon. And now, the emerging markets that Israeli businessmen have so successfully cultivated over the last five years – in particular, those in China and India – are seeing significant slowdown in factory production, rising costs and falling demand for their products from world markets. India’s finance minister yesterday called a press conference to try and calm fears that his country’s finances are in a far worse state than they are letting on, but he proved unconvincing and only served to add weight to the worries of investors.
Merryn Somerset-Webb, editor-in-chief of the highly regarded financial weekly Money Week, recently wrote, “…we’ve always assumed that the end game of the popping of the great credit bubble would be not one, but an ongoing series of sovereign and banking crises”, while The Economist suggests that a run on Spanish banks is “all too plausible, especially if Greece is forced out of the euro”.
I’ve been stunned over the last year at the complacency and naivety of many in Israel who seem to think that just because our own economy is relatively well managed, we will avoid all the heartache that is sweeping across the financial markets and the business sector. The ‘ihiyeh b’seder’ (it’ll be fine), or ‘al tidag’ (don’t worry) set, don’t seem to appreciate that the world’s finances are now inextricably linked, and that what is hitting and hurting others will definitely be coming our way too, if it hasn’t already arrived.
The unsustainably high cost of housing over here and the massive mortgages that people are expected to fund, the very high cost of living, and the relatively low wages, hardly inspire confidence that in an economic downturn we will glide through untouched. There is however no need to panic, but there is a need to realise that living up to or over the hilt is, (as it always has been), only going to end in tears. It is essential that a degree of reality and sensible planning for hard times ahead helps cushion the landing from what might prove to be a major fall that, for once, will be through no direct fault of our own and is down to sheer international market forces.
It’s time to tighten our belts, take a grip on our household finances, accept that the ‘gravy train’ might be slowing into the buffers, and be fully prepared to weather the storm and come through the approaching downturn in Israel’s economic fortunes with as little pain as possible.