(theJewishweek)— Benny Cohen, the owner of a popular wine and tobacco shop in the center of the capital, didn’t need the government — or a looming election — to tell him what he has known for months: that Israel is on the verge of a recession.
“Business is down at least 40 percent in the past few months,” reports the affable shopkeeper, flanked by rows upon rows of specialty tobaccos, pipes and cigarettes, and handsome shelves displaying the latest Israeli and international wines and chocolates.
Noting that his shop has been around for 50 years — just 10 years less than the state — Cohen said his clients are spending less money than they used to, “though people are still buying cigarettes,” he said.
Though concerned about the situation, Cohen is also philosophical. Israel, he stresses, has faced much worse, including wars and terror attacks, some just outside the door of his attractive shop.
“This isn’t something we have any control over,” Cohen said with a shrug. “The entire world is having problems and it’s impossible to know what will happen.”
This week’s prediction by the Bank of Israel that Israel will experience a full-fledged recession in 2009 didn’t come as a surprise to many Israelis, who have been seeing the signs for months.
Even so, the central bank’s announcement made it seem official and is sure to have repercussions during the upcoming national elections slated for Feb. 10. And while the recent war in Gaza reinforced the need for a strong military in the eyes of many Israelis, the economy will also be front and center come Election Day.
Virtually every Israeli knows someone who has lost a job in recent months, and those who are still employed fear for their jobs. About 17,500 people were laid off in December 2008, the highest one-month job loss in 20 years. Another 46,000 could lose their jobs in 2009, the central bank said.
In his sobering report, Bank of Israel Chairman Stanley Fischer, the man who sets monetary policy in Israel, predicted that unemployment will reach 7.6 percent later this year (it was 6.1 percent in 2008, the lowest in 21 years), and that the budget deficit will increase to 4.1 percent of the Gross Domestic Product (GDP). Exports could fall as much as 6.9 percent this year, and productivity in the business sector by 0.9.
Fischer predicted that consumer spending will rise by just 1.1 percent in 2009, compared to 3.9 percent in 2008. That’s bad news for businesses used to flourishing in this increasingly materialistic society, and for the millions of people who were already just scraping by every month.
An editorial in this week’s Maariv urged readers not to forget the nation’s growing economic crisis when they got to the ballot box.
“The security agenda must not marginalize parties and politicians who care about fair wages, a social safety net and defending against poverty and distress,” the editorial said.
Shlomo Maoz, chief economist at Excellence Nessuah Securities, has no doubt that “economics will replace defense issues, even after the recent operation in Gaza.”
Like many other economic analysts, Maoz believes that former Prime Minister Benjamin Netanyahu, who served as finance minister in 2003 and 2005, is the most qualified of the top three candidates — Netanyahu, Foreign Minister and Kadima Party leader Tzipi Livni and Labor leader Ehud Barak — to deal with the looming economic storm.
“He has already proven his ability to formulate an agenda and implement it,” Maoz said. “I think he can come up with a solid plan, which is what is needed right now. If Livni has such a plan, I haven’t heard about it. Barak is a fine defense person but I don’t think he really understands economics or the needs of the poor.”
Aaron Katsman, a financial adviser and editor of IsraelNewletter.com, agrees.
“Livni and Barak are following much more the policies that most of the global governments are taking at the moment, which is to spend their way out of the problem,” Katsman said. “They’re putting money into infrastructure, building roads and bridges and mortgaging the future by increasing government debt that will ultimately be borne by the taxpayers.”
Netanyahu, in contrast, “is looking at cutting corporate and personal taxes, things that provide businesses and individuals an incentive to keep more money, which they in turn spend or use to become entrepreneurs. He also wants to expand privatization, something he started earlier in the decade. If the Israel Lands Authority, for example, were to sell off state-controlled land, it would bring in billions of shekels,” Katsman said.
