'We still must navigate through economic storm'

It may be sailing on stormy waters, but Israel’s economy is in strong shape going into its 65th year, Finance Minister Yuval Steinitz told The Jerusalem Post in an interview ahead of Independence Day.

Steinitz described Israel’s growth figures of 4.8 percent for 2011 as “quite exceptional” and noted that it had posted the fastest economic growth in the Western world in 2010 and 2011, as well as being the only country in the developed world where the level of investments in the real economy had actually gone up.

However, Steinitz cautioned that Israel was not yet out of the woods. “Generally speaking one can say that the Israeli economy today is in better shape than it was [when the global economic crisis broke out] in 2008... But we are not yet harboring in the port; we still have to navigate our way in the ongoing economic storm,” he said.

“Israel was always famous for the ability of this little nation to defend itself, but over the last three years we have become quite well known for our capacity to defend ourselves economically,” he added. “I think this is a great and important achievement by Israel and its people.”

Steinitz said Israel’s impressive growth was due to the government decision not to pour money into the economy through stimulus plans and tax cuts, a policy he said the US and other countries had adopted, and one that he derided as “sacrificing the future to save the economy for the present.”

The finance minister did not rule out raising taxes if the budget deficit continued to increase.

“Currently at least, the picture [for 2012] is that we believe that we will end up with a deficit of around 3.3%, slightly higher than what was planned [2%] but not that significant,” he said.

“Until now I didn’t decide to initiate any new taxes because it was unnecessary; if the deficit is 3.3% because our revenues are going down a bit this is not terrible...I won’t give any figures, but if it will be beyond the range of 3-4% we might reconsider.”

Steinitz said he understood why people felt they were not sharing in the country’s economic success and was aware that this summer may see a repeat of last year’s social justice protests despite steps taken by the government.

“There are many things to be fixed in the Israeli economy and society and therefore I can understand why people are not satisfied despite the country’s economic success,” he said. “We have a lot to fix in society and we are doing it, but it takes time.”

The full interview will appear in Friday’s paper.