‘ Political stability is a must in order for Israel’s economy to remain competitive’
Chief economic adviser at Bank Hapoalim analyzes COVID- 19 Israeli economy
Addressing The Jerusalem Post Annual Conference, Prof. Leo Leiderman, chief economic adviser of Bank Hapoalim, Israel’s largest commercial bank, analyzed Israel’s economic conditions before the COVID- 19, the pandemic’s effect on the economy and the prospects for a full economic recovery.
Israel entered the crisis with favorable economic conditions, said Leiderman, with robust growth, full employment, a low ration of public sector debt to the gross domestic product and a high private savings rate. Israel was one of the first countries to close its borders and adopt a strict lockdown, which yielded positive results during the crisis’s initial stage.
After policymakers lifted many of the restrictions imposed at the onset of the pandemic, another wave of contagion returned, which has led to the current lockdown. “Pandemics and lockdowns are not good for any economy,” said Leiderman, noting that the world is experiencing the worst recession since the Great Depression of 1929.
While economic forecasts are accompanied by a great degree of uncertainty, Leiderman estimates a fall of at least 5% in Israel’s GDP this year, followed by positive growth of about 4% next year. He added that Israel’s economic performance is not markedly different from those of the US, Germany and the Netherlands.
When the pandemic struck, said Leiderman, policymakers moved quickly to avoid a major economic and social catastrophe by increasing liquidity, reducing interest rates, increasing government spending to support the health system and providing support to the unemployed.
Leiderman said that Israel’s economy needs political stability. and expressed the importance of a approving a government budget for 2021 and a multi- year economic policy plan. “Political stability,” he explained, “is a necessary condition to continue having a vibrant, dynamic ecosystem in Israel.” He added that without political stability, Israel will not be able to take advantage of its full potential and will be less prepared for an economic recovery, if and when the pandemic allows.
He added that Bank Hapoalim is the first banking institution in Israel to sign a memorandum of agreement with Emirates NDB, the largest lender in the United Arab Emirates, and that additional business cooperation agreements will soon follow. He concluded that “our view at Bank Hapoalim is that we need to be modest in our approach to our potential business partners at the UAE. Cooperation and confidence will be built in a gradual way over time.”