'Western economies are signing on with Israel with their eyes closed'

Banking expert: Israel is at a stable starting point despite the political instability, thanks to the low unemployment rate

VARIOUS ISRAELI banknotes are displayed for an illustrative photo. The economy is well on its way to the pre-pandemic standards of budgetary discipline. (photo credit: NIR ELIAS/REUTERS)
VARIOUS ISRAELI banknotes are displayed for an illustrative photo. The economy is well on its way to the pre-pandemic standards of budgetary discipline.
(photo credit: NIR ELIAS/REUTERS)

Israel is stable economically despite political instability, due to its low employment rate, a banking expert told Maariv.

Daniel Georgi, director of the Israeli Securities Desk at Mercantile Bank states that "the OECD's growth forecast for the global economy is 3% compared to 4.5% in the previous forecast, and is expected to grow by 2.75% in 2023. Israel will grow by 4.8% in 2022 compared to a forecast of 4.9%."

He explained, "Since the decline in Israel’s growth is minor, many Western countries are willing to sign agreements with Israeli companies without intense scrutiny."

In a review of the program by Maariv, Mercantile's director expressed optimism about the state of the markets in Israel, despite the World Bank's growth forecast of the US economy plunging from 4.1% to 2.9%. 

He believes that the positive facets in the Israeli economy such as an inflation rate of only 4%, a budget surplus from the beginning of 2022, a deficit that dropped to zero and low unemployment figures place the Israeli economy at a good starting point. 

 Outgoing Prime Minister Naftali Bennett and incoming Prime Minister Yair Lapid, June 30, 2022.  (credit: KOBI GIDEON/GPO) Outgoing Prime Minister Naftali Bennett and incoming Prime Minister Yair Lapid, June 30, 2022. (credit: KOBI GIDEON/GPO)

Despite the political instability, all of these factors will positively affect Israeli markets.

"Since the decline in Israel’s growth is minor, many Western countries are willing to sign agreements with Israeli companies without intense scrutiny."

Daniel Georgi, director of the Israeli Securities Desk at Mercantile Bank

World economic slow down

The World Bank and the OECD have emphasized the negative impact of the Russian invasion of Ukraine, which caused a slowdown in the world economy and skyrocketed energy and food prices. The invasion accelerated inflation and caused significant damage to economic growth.

Raising interest rates could slow demand in the state, but could overshadow firms that will consume higher-interest credit. Biden will work to persuade the Saudis on his planned visit to Riyadh next month to increase oil supplies. 

This step has to lead to moderate rising energy prices. The rise in the US price index, along with the internalization that the process of raising interest rates may be longer and sharper than expected, led to another wave of declines in the markets, with the Nasdaq index falling by 30% since the beginning of the year.