Former chief economist at Israel’s Finance Ministry, Yoel Naveh, said that Tel Aviv needs to move forcefully and with immediate measures to formulate a responsible budget for next year to ward off the threat of a looming crisis.
Naveh warned that this crisis could drag the economy into recession and endanger national security.
If the government fails to address next year’s budget through spending cuts, tax increases and reforms, it will face a financial crisis within the next three to five years, Naveh added in a paper excerpted from which was published in The Times of Israel.
The paper, written by Yoel Naveh, reviewed many indicators of the difficult conditions facing the Israeli economy, as more than 46,000 companies have gone bankrupt, tourism has stopped, and the credit rating has been downgraded.
Foreign investments have also declined by nearly 60% due to the war, while 49% of Israeli technology companies have reported cancelling their investments.
The number of Israelis leaving the country also rose to 285% after the war on the Gaza Strip.
Credit card growth was weak in August, rising 3.3% year-on-year as the war weighed on individual spending. The increase was modest, falling short of the 4% unemployment rate.
One of the indicators of the decline in consumption during the war is the decline in total cash withdrawals in August by about 5% on an annual basis.
As Israel’s war on Gaza approaches a year later, 49% of local tech companies and startups are suffering from deinvestment, The Times of Israel reported.
This is forcing many of these companies to move their operations outside the country as confidence in the government’s ability to lead the recovery and stimulate growth is lost.
Over the past decade, the Israeli economy has become increasingly reliant on the technology sector, which before the war contributed about 20% of the country’s GDP, generated 25% of income taxes, and represented more than 50% of exports.
