Has The Global Economy Hurt Israel? Finance Chief Thinks So

Last week in the tourist city of Eilat, the big-wigs( yours truly was not invited) of the Israeli economy got together to speak about the future of the Israeli economy. Speaking about the global economic slowdown and the ramifications on the Israeli economy, Ministry of Finance director general Yarom Ariav mentioned that he expects a slowdown locally on the heels of the global economic slowdown. Pretty standard analysis.Then, according to Globes, Ariav said, “The decision to integrate into the global economy has greatly limited options for the Israeli economy. 10% annual growth by emerging markets affects raw materials, oil, and disposable goods.”

What?

Is he saying that that fact Israel is now part of the global economy a bad thing? Would it be better for Israel to be a protectionist and isolationist economy, and just produce goods for our own survival?

For decades Israel has had to fight against an Arab boycott, and general acceptance into normal global trade channels, and now he says that it’s a bad thing? The Israeli economy has been enormously helped by global trade. I can’t imagine that anyone can even dispute that. The Israeli economy is based on exports. If the country wasn’t part of the global economy what would happen to the economy? Sure we now have inflation but that’s part of the normal business cycle. It’s an off-shoot of strong growth. The fact that not all the inflation is imported but a large part is based on local domestic consumption is a good thing. It means that in general, Israeli’s have more disposable income as a result of a strong economy.

Israel is an economic global player. It’s too bad that people in the Finance Ministry don’t understand that.

Disclosure: Author’s fund has no position in any stock mentioned as of 7/06/08.

Posted in Categories: Contributor, Economy, External Research.

Subscribe by RSS Subscribe by Email