Israel’s economy victim of political gridlock

At the government meeting Jan. 12, it was hard to ignore the contradiction between the statements of Prime Minister Benjamin Netanyahu and Finance Minister Moshe Kahlon regarding the economic achievements and might of the state, and the pessimistic picture presented by senior Finance Ministry officials regarding an expected growth of 4.2% in the deficit in 2021, and the need for concrete and immediate steps to address it.

One of the ministers who participated in the meeting told the financial paper Globes anonymously, “The fact that we are in an ongoing election period makes the ministers almost like extras in a play … we don’t have tools to address the problems, especially the deficit. We all know that this problem will likely be addressed by a government with a different composition, perhaps completely different, and so there's no real use of talking about it now.” 

The financial indexes of the State of Israel are not only negative, since Israel shows economic stability, low unemployment and good capacity to raise capital in the global markets. However, the Finance Ministry officials presented some troublesome figures at the meeting, chief of which is a decrease in state revenue from taxes and an increase in government spending during the election year. During the meeting, Netanyahu cut off the Finance Ministry speakers and argued that their forecast is not well established, since it is not clear what government would be formed following the election and what it could do in the next year. 

After the meeting, one of the senior Finance Ministry officials told Al-Monitor that their forecast was actually conservative, in light of the political dead end expected even after the March 2 election. As we know, Israel has been in an election mode for more than a year. The direct significance of this is that the government is paralyzed and cannot move processes, plans or new reforms, but can only continue implementing the policy set in December 2018.