ILS Monthly Review September 2018
August in review
Economy continues to perform
- Tax breaks for small businesses welcomed
- Rising unemployment a threat to growth
- BoI against defence budget increase
- Israeli business capitalization a concern
Start-up economy boosted
The Government’s plan to give tax breaks to small businesses is a sensible attempt at leveraging Israel’s reputation as a start-up economy commentators report.
Unemployment a concern to public spending
Unemployment reached 4.3% in July, any further significant increase will threaten the Governments fragile public spending plans.
BoI rails against increased defence spending
Israel rose from 17 to 15 in global defence spending in 2017. The BoI is concerned about any further increase in spending and it effect on public finances.
Business capitalization a concern
The flipside of Israel’s status as a start-up nation is the lack of large well-capitalized businesses. In any downturn, start-ups with little capital but heavy commitment to future expansion could suffer badly
September what to watch
Business promotion needed
- GDP to remain strong
- ILS to bounce versus weaker dollar
- Rising inflation is no concern to BoI
- Security to remain the Government’s priority
GDP to remain strong
Israeli GDP is likely to remain close 4% well into 2019 as the economy benefits from increased FDI.
Weakening dollar a concern to Israeli exporters
As the US economy starts to grow at closer to 3% than 4% the dollar could weaken. Any subsequent rally in the ILS could hit exporters who have taken advantage of a strong dollar in 2018.
Rising inflation no concern to BoI yet
The weaker ILS has started to feed inflation but as the dollar weakens, a stronger currency should bring prices lower.
Security remains no.1 priority
Despite BoI concerns, the Government has pledged to do all it can to ensure the safety of all Israelis.
