‘Peace could increase growth rate by 60%’

According to study, functional peace deal based on Saudi Peace Initiative would increase Israel’s growth rate from current moderate 3% a year to 4.8%.

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July 9, 2014 11:02
1 minute read.
Netanyahu and Abbas

Netanyahu and Abbas. (photo credit: REUTERS)

 
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Everybody knows that conducting war is costly, but a lack of peace has its own, often unrecognized, opportunity costs – what Israel misses out on because there was no peace.

According to a study commissioned by the Israel Peace Initiative, a functional peace deal based on the Saudi Peace Initiative would increase Israel’s growth rate from its current moderate 3 percent a year to 4.8%, a 60% increase in the growth rate.

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“It’s not even the best-case scenario. We think it’s quite a conservative,” said former Finance Ministry director Yarom Ariav, who co-authored the study with former commissioner for state revenue Yoram Gabai and Eldad Brick, as well as Yigal Tamir and Koby Huberman from the Israel Peace Initiative.

The study assumes that Israel will develop strong regional trade ties with its Arab neighbors, opening the markets of the Middle East and eventually increasing exports NIS 30 billion a year. It also sees tourism increasing to 8 million a year from the current 3m., largely because people from the West will be less afraid to come. Tourism alone will contribute $22m. to GDP.

Israel would also receive $10 billion more in foreign investment.

From a budgetary perspective, in 10 years the state would save NIS 67b., according to the study. NIS 2b.

would come from lower-interest payments as a result of decreased security risk, and another NIS 10b. would come from the defense budget. It would also save NIS 1b. that it currently spends on settlements, though the study did not factor in the cost of evacuating settlements.



According to Ariav, however, most of the new revenues would come from higher economic growth.

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