How much will elections cost Israel's economy?

Like many Western countries, Israel provides substantial state funding for political parties and their campaigns.

By EYTAN HALON
Updated: DECEMBER 24, 2018 19:09
Prime Minister Benjamin Netanyahu, December 24, 2018 (photo credit: MARC ISRAEL SELLEM/THE JERUSALEM POST)
Prime Minister Benjamin Netanyahu, December 24, 2018
(photo credit: MARC ISRAEL SELLEM/THE JERUSALEM POST)
Elections are a costly business.
Add together state financing for party campaigns, Central Elections Committee operations and an additional public holiday on Election Day, and you will find that democratic rights come with a hefty price tag.
Like many Western countries, Israel provides substantial state funding for political parties and their campaigns. According to some estimates, state funding for parties could cost the state more than NIS 300 million during the election period, including the financing of major party primaries for the first time after legislation passed earlier this year banned candidates from receiving contributions or taking out loans.
In addition, the budget for the Central Elections Committee - the body charged with overseeing the elections – stands today at NIS 283 million, representing a 17% increase since the 2015 elections.
The greatest cost, however, is election day itself. The day is a paid vacation day for almost the entire workforce, and the loss in working hours is expected to cost the country as much as NIS five billion, based on annual GDP.
Finance Minister Moshe Kahlon, whose election outcome will almost certainly reflect the public’s faith in his management of the economy since 2015, was quick to highlight the benefits of heading for snap elections.
“We decided to head for elections as quickly as possible because the shorter the elections are, the less it will cost the country,” Kahlon said.
Kahlon is correct that rapid elections mean lower campaigning costs, but there is little evidence to suggest that calling elections will have a lasting impact on the national economy.
The relatively short electoral campaign and the certainty that will be restored to the market immediately after election results are announced should mitigate any negative impact on the economy in the build up to the elections.
Even following the surprising margin of Netanyahu’s 2015 victory, shares on the Tel Aviv stock market remained largely indifferent to the political outcome.
“Rapid elections really do not have a major impact on the real economy – on growth or the fiscal deficit, which has been looking problematic this year,” Leader Capital Markets macroeconomist Yonatan Katz told The Jerusalem Post.
While possible to envisage election uncertainty leading to a modestly weaker shekel and higher inflation as a result, the opposite will likely be true come election day.
“Regardless of who wins and what coalition is formed, people have a sense that uncertainty is coming to an end on election day, and so you have the opposite effect. You will see the currency appreciating,” said Katz.
Although the stock exchange did witness a slight slump following the party heads’ decision to call elections on Monday afternoon, albeit modest in comparison to Sunday’s stock exchange plunge, the Israeli economy will continue to remain far more sensitive to global markets in the coming months than the upcoming elections.