Bethel Finances: Israel's economy markedly less export based

www.bethelfinance.com

Figures published by the Central Bureau of Statistics today indicate that the weight of exports in the total sources available to the economy (production plus imports) has been steadily declining in recent years. Whereas in 2007, exports proudly bore the title "Israel's economic locomotive", when they accounted for 42.4% of GDP, by 2009, this proportion fell to 34.7%. In 2011, it was 36.5%.

Israel benefited from the global economic boom in 2005-07, including in Western countries, which accounted for 60% of the country's exports. Exports accounted for 42-43% of Israel's economic sources during these years, and were the main driver of economic growth.

However, it is important to note that most of the sources at this time were already spent on private consumption. 2009 was the turning point, when the global economic crisis caused an unprecedented drop in international trade.

Despite Israel's economic recovery, reflected in its 7.6% GDP growth rate in late 2010, exports did not return to their previous proportion of economic sources, partly because the US and European economies did not recover to the same degree, and because of the growth in Israel's two other growth engines - private consumption, which reached almost 60%, and investment, which rose from 16% in 2007 to 20% in 2011, mostly due to the surge in investment in fixed assets, such as residential construction.

The Israeli economy is already in a slowdown, according to various indicators, and most experts believe that this is only the beginning. The world is also heading toward a new recession, and Israeli exports will probably take a hit.

Mr. Cedric Marmet from Bethel Finance says, "In effect, Israel's economic growth is unbalanced, and is based on just one growth engine, rather than a combination of engines. This increase's the economy's vulnerability, and is unhealthy."

Mr. Marmet adds that this imbalance affects Israel's balance of payments, one of the most important variables of an economy. He says that exports are an especially important growth engine for a small economy, such as Israel, and make it possible to reach larger markets. He also believes that, through exports, Israel has been undergoing steady change to a high-tech economy, because that brings to bear Israel's relative advantage.