Commentary: Israel’s economy deserves top marks

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July 11, 2015 23:04
3 minute read.
money

money. (photo credit: REUTERS)

 
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Since achieving independence, Israel has set a high standard for determination, perseverance and ingenuity. From conquering the desert to prevailing against impossible odds to today’s groundbreaking technological innovations, Israel has redefined resourcefulness.

However, another area where Israel deserves top marks – its outstanding success in building a strong economy – is often overlooked. But although economic resilience is perhaps not the first thing people associate with Israel, the Israel Bonds organization works hard to change that perception every day.

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When Israel Bonds tells its clients that investing in Israel bonds is a means of becoming a stakeholder in Israel’s strong economy, it is not a marketing slogan – it is a fact. “The performance of the Israeli economy in recent years makes Israel one of the world’s best economies,” Moody’s chief economist Mark Zandi said in May.

The Greek debt crisis sets an appropriate context for Israel’s exceptional economic performance.

An important point of comparison is the respective debt-to-GDP ratio of the two countries – a key indicator of the strength of the economy, which in turn helps determine credit ratings and interest payments.

Greece’s debt is 180 percent of GDP. Israel’s was 67.1% at the end of 2014, marking the fifth straight year its debt-to-GDP has declined. This number is outstanding, not only when compared to Greece, but also the euro-zone average of 107.7%, the OECD average of 94% and the US average of 105.6%.

Moreover, as Greece struggles to repay its debt, Israel Bonds is proud that Israel has never missed payment of principal or interest on a single Israel bond since the securities were first issued in 1951.



Additionally, “Greece’s fiscal situation is widely viewed as a dilemma of its own making after decades of free-spending policies,” The Washington Post recently reported. Conversely, Israel has been consistently praised for exercising fiscal responsibility. For example, Fitch ratings agency in May praised Israel’s progress in narrowing the deficit to “the lowest [point] since 2008,” as well as “a gradual downward trend” of the debt-to- GDP ratio, and “growth [that] is stronger and less volatile than peers despite occasional conflict-related fluctuations.”

Last fall, Standard and Poor’s said Israel’s core “strengths [are its] prosperous and diverse economy, the contribution of natural-gas production to a healthy external balance and its relatively flexible monetary framework.”

Last summer’s 50-day war with Hamas had minimal impact on the economy, which is also proof of Israel’s fiscal discipline. Fourth-quarter growth was 7.2%, Israel’s “fastest quarterly growth in nearly eight years,” Reuters reported.

According to OECD forecasts, Israel’s GDP is expected to grow 3.5% in 2015, compared with an average 1.9% for OECD member countries and 2.0% for the United States.

Paradoxically, although Israel’s economic achievements may not be on the minds of Israel’s mainstream supporters, they are most assuredly the focus of Israel’s detractors – specifically, proponents of the boycott, divestment and sanctions (BDS) movement.

In encouraging economic, cultural and educational boycotts, BDS advocates have convinced themselves they can defeat Israel by bringing down its economy. At Israel Bonds, we think otherwise.

Following back-to-back years (2013-14) in which Israel Bonds exceeded $1.1 billion in US sales alone, we are on track to do it again with over $600 million in 2015 domestic sales. Prior to 2011, that would have constituted sales for the entire year.

The continued strong sales are indicative of our proactive approach to strengthening Israel’s economy, which, of course, is the most effective response to BDS.

Significantly, these sales comprise a wide spectrum of investors, including individuals, states and municipalities, financial institutions, endowment funds, universities and more. Despite their diversity, each Israel bond investor shares the commonality of acquiring a sound investment, helping Israel’s economy remain resilient and delivering a resounding “No!” to BDS advocates through a direct repudiation of their boycott agenda.

In an ideal world, BDS sympathizers would end their fixation with Israel and turn their attention where it belongs: the tyrants and despots of the world who force their citizens to live in abject poverty and severe repression. That, however, would be too much to ask.

Nevertheless, as global economies continue to falter, we are gratified that Israel, as it has done in so many ways, continues to stand apart.

Izzy Tapoohi has been president and CEO of Development Corporation for Israel/Israel Bonds since October 2011.

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