Opinion     

Israel faces dented economy as Gaza war ends

Xinhua, September 9, 2014

• Two weeks ago, the government approved an across-the-board two percent cut (0.56 billion dollar), sparing only the Defense Ministry and Israel's internal security service (the Shin Bet).

  But the Bank of Israel claimed that this is not enough, and that taxes should be increased in order to prevent a dramatic increase in Israel's deficit. Israel's central bank Governor Karnit Flug and Finance Minister Yair Lapid were engaged in a public dispute concerning the best strategies to handle the extra costs inflicted by the war.

  Lapid had promised his middle-class constituency to prevent tax hikes even at the cost of having to step down, and instead he plans to raise the deficit target from the current 2.5 percent to 3.5 percent. But Flug said a deficit above the level of three percent "will clearly signal a stepping back from the commitment to maintain fiscal discipline, and increases the risk of losing credibility."

  Education and welfare will suffer most. The government decided to cut 63 million shekels (17.3 million dollars) in the Ministry of Welfare, although Welfare Minister Meir Cohen insisted that there is no surplus in his ministry. "From whom are we expected to take? Those who have nothing to put in their children's school sandwiches?" he said in a statement.

  The 4,564 rockets launched by Hamas militants at Israel caused no major damages but managed to deter tourists, causing a 26 percent drop in the number of tourists in July, in a year which was officially expected to be an all-time record year for Israeli tourism.

  "2014 will clearly not be a record year," said Rafi Beeri, vice president of marketing and sales at the Dan Hotels, Israel's largest hotel chain. Dan Hotels estimates that even if tourism will see a "swift rebound" as Finance Minister Lapid said, the war will still cause a ten percent decline in its incomes this year.

  Augusts' statistics have not yet been published, but the chairman of Israel's Incoming Tour Operators Association, Ami Etgar, said that they may show an even larger drop. Tourism cannot be expected to recover in the next six months, he said, and the association has warned that "tens of thousands of employees in the tourism industry may lose their jobs."

  A recent survey by the Manufacturers Association of Israel had estimated the accumulated damage to plants at 370 million dollars.

  However, according to Ayal from Infinity Investment Group, despite the impact of war, a healthy Israeli economy will not be dramatically damaged.

  "The debt to product ratio is as low as it has ever been, the macro-economical parameters are stable, the high-tech sector will continue to pull the economy forward, and the recently discovered natural gas fields offshore Israel will start yielding significant income to the state as early as 2017," he added.

Copyright © China.org.cn. All Rights Reserved