ILS Monthly Review June 2018

Global opinion over the moving of the U.S. Embassy to Jerusalem is too influenced by TV pictures to give an objective view other than to say the Israeli economy is likely to suffer until calm is restored since it is a decision that won’t be reversed.

The Shekel strengthened throughout the month of May moving from 3.6357 to 3.5419, but it was a volatile month with quite large ranges on a daily and weekly basis. This has made financial planning difficult for major exporters.

GDP in Q1 2018 was 4.2% following Q4 2017 growth of 4.4% and Q3 at 4.1%. There is little risk of the economy overheating despite the inflationary risk of record high employment. Productivity needs to be improved but overall the economy is performing well.

The latest report from the IMF on the Israeli economy gave current performance an 8/10 but must improve productivity to retain this mark. There are gaps appearing in skill levels across the economy, which need to be addressed. Strong growth, foreign currency reserves and low unemployment, together with a rise in competition to reduce monopolies, are all positive.

A possible answer to the skill shortage may be a more inclusive policy and greater training availability. This is a new initiative that the Government will introduce to ensure growth and productivity continue to rise.

In a continued effort to improve levels of education for school leavers a plan is to be introduced that may lead to a lengthening of the school day. That will allow the same amount of physical activity to be supplemented by more time devoted to arts and sciences to ensure a minimum standard is maintained.

The effect of the recent conflict between Israel and Iran near Israel’s Northern Border were closely observed not only as a test of security readiness, but also to see their effect on the economy. The currency barely moved, which bodes well but any escalation may have more serious consequences.