Israel breaks off talks with Palestinians
Market analysts weigh in with their responses to the 2006 Knesset election results.
Goldman Sachs Associate Global Markets Economist Michael Vaknin, who covers Israel says, “The economic repercussions are negative, and worse than we expected. The coalition will be less stable. Pre-election polls gave the impression that Kadima will link up with the Labor Party to create a majority bloc, but on the basis of the results, Kadima will have to bring in more parties, which will undermine stability, especially as there is no common denominator between the parties.
“The election results indicate that the next government will focus on a social agenda, and we hope that the government will be able to maintain a budgetary balance and keep the economic principles of the Sharon government, which the world welcomed and attracted foreign investment. If the government keeps its predecessor’s targets, i.e. a budget deficit of 3% of GDP, and 1% growth in spending in real terms, then, so long as there are no distortions in budget allocations, any specific change won’t be perceived as problematic.
“Kadima will inherit the Likud’s economic approach of the free market. Therefore, the choice of the next finance minister is critical. It’s no secret that foreign investors support a free market, so if Kadima surrenders the finance portfolio, this will have negative repercussions on the market. That said, the Labor Party has been sending more responsible signals recently, and it seems that it will also try to preserve the budget framework. We therefore do not expect foreign investors to make their exit from Israel, even if Labor gets the finance portfolio, and the media will play its role in allaying apprehension over this.”
Meitav CEO Zvi Stepak: The capital market fears Amir Perez in charge of the economy
“The election results have created a political map that is less good than the one that would have resulted if the polls of the past two weeks were right. We see four main problems created by the resulting map.
“The first is the fact that no one party has a strong mandate to assemble a stable government. In other words, no party has 35 Knesset seats, which makes it difficult to assemble a government. Second, as a result of this, parties will have much greater bargaining power vis-a-vis Kadima. Third, we’re not merely talking about bargaining power, but parties that stress social issues: Labor, Shas and the Pensioners Party. Each of these parties is liable to lead to an increase in the budget. Current law allows for a budget increase of 1% a year, but there is concern that this limit will be breached, which could have negative repercussions on foreign investors’ perspectives. Fourth, Labor’s bargaining power to man the Ministry of Finance has increased, because of its small gap with Kadima, and the capital market (not necessary us) fears economic policy possibly led by MK Amir Perez.”
IBI analyst Elah Alkalay: The debt/GDP ratio is now well below target, so there are substantial budget surpluses
“Every assessment predicts that the next coalition will be much more welfare oriented. This means that much more money will flow to groups such as pensioners, Shas, contract workers, and those earning the minimum wage. The election results increase the likelihood that Amir Perez will be the next minister of finance, which the capital market will not like. The cost of the convergence plan is also huge (estimated at NIS 100-150 billion). In other words, there will unquestionably be pressure to raise the deficit.
“On the other hand, it should be remembered that the debt/GDP ratio is now well below the target, which means that there are substantial budget surpluses. In conclusion, we predict greater uncertainty in the near term, until the coalition picture becomes clear, portfolios are filled, and the size of the concessions Acting Prime Minister Ehud Olmert will have to make are known. We don’t expect the Tel Aviv Stock Exchange (TASE) to crash, but it we’ll probably see a fall in share prices.”
Published by Globes [online], Israel business news - www.globes.co.il - on March 29, 2006
© Copyright of Globes Publisher Itonut (1983) Ltd. 2006
You comment was recieved and soon will be published.
Thank you for posting your comment, which will be reviewed for publication.
Load more comments
The move follows yesterday's agreement between the Fatah and Hamas factions.
Beer in Israel among world's most expensive
Only Scandinavia, Iceland, and Monaco are more expensive, according to "Thrillist."
C'tee proposes spending up to $70m on PM's plane
The Goldberg Committee also proposes a new prime minister's residence and office.
Average Israeli income tax rate among lowest in OECD
Average Israel tax rate has dropped in past 3 years, while rising in most OECD countries.
Gov't opens meat and dairy markets to imports
The government focused on products worth 17% of average Israeli family expenditure.
Israel-Lebanon deadlocked over offshore border
The dispute is delaying publication of an exploration tender for Lebanon's Block 9.
Barclays backs Yair Lapid's policies
"Under Lapid, the government has limited expenditure and increased revenues."
"You can't teach entrepreneurship"
Angel investor Zohar Gilon relies on his own judgement rather than due diligence when selecting investments.
If Rose Fostanes played basketball
Reforms in regulations for foreign caregivers are welcome, but don't go far enough.
Antitrust Authority disappoints on gas competition
The only new company that will compete against Tamar and Leviathan will own less than 8% of Israel's proven gas reserves.
When innovation means a refrigerator
Jamshyd Godrej believes economic development in India must go hand in hand with environmental and social awareness.
Prof. Zvi Eckstein supports NIS 3.30-3.40/$ floor rate
The former deputy Bank of Israel Governor is the first senior figure from the financial system to advocate a floor rate.
2013 boom year for Israeli high-tech
In the first half of the year, there was a 52% rise in demand for mobile and web developers, and salaries are up as well.
Strong shekel forces Israeli manufacturers abroad
Israeli manufacturers tell "Globes" they are losing money due to the current strength of the shekel.
"Ending QE3 will harm the economy"
Prof. Richard Clarida will tell "Globes" Israel Business Conference that the main risk to the US economy is its political system.
Israel offers favorable tax regime for companies
"Globes" and Baker Tilly Israel accountants found Israel's tax benefits are among the most attractive in the West.
Slowdown will worsen
The vested interests that continue to claim that the economy is improving are deceiving the public, says Eyal Horowitz.
Can the US maintain growth after QE3?
Leading economists will discuss "The US: catch 22 the zero interest rate" at the "Globes" 2013 Israel Business Conference.
"The worst could still be ahead in Europe"
Prof. Charles Wyplosz will discuss Eurozone recovery at the Globes Israel Business Conference on December 8-9.
"Let capital pipelines function to full potential"
Amir Bramly argues that limited investment supply is stifling small and medium Israeli companies.
Budget cuts threaten 10,000 defense industry jobs
Senior executives warn many factories are in danger of closing due to the drying up of defense ministry's orders.
Israel faces water surplus
The Water Authority is considering scaling back production at desalination plants.
Global economic trends are disturbing
World trade is not picking up, and only a handful of countries are recovering strongly - but Israel is among them.
Is recovery around the corner?
At the conference on December 8-9, leading experts will examine the prospects for global recovery in 2014.