"I'm not deterred by an increase in the budget deficit. We've just emerged from a difficult security situation and economic shock, and a boost is necessary, even if the deficit grows," Bank Leumi (TASE: LUMI) CEO Rakefet Russak-Aminoach said today at a "Calcalist" conference in Tel Aviv.
Russak-Aminoach was commenting on the economic situation following Operation Protective Edge, and what should be done to get things back to normal. "The revenues side of the economy should also be addressed. Existing tax exemptions should be eliminated, and new ones should certainly not be created," she said, hinting at Minister of Finance Yair Lapid's plan to grant a VAT exemption on first apartment purchases. Russak-Aminoach does not support a tax increase, saying that the measures she is proposing are designed to prevent such a measure. "We need cooperation between the business sector and the government, moving rapidly towards a solution. Israel has already emerged strengthened from challenging and complicated situations, and I believe it will happen in this case, too," she said.
As CEO of one of Israel's two largest banks, Russak-Aminoach is well aware of the state of the economy, and she commented on the economic figures she has seen over the past two months. "During the weeks of fighting, we saw figures that were bad by any standard. At our company, through the Leumi Card credit card company, we saw a drop in consumption, something that we haven't seen for years. On the other hand, yesterday I received figures from the period since the ceasefire, and it all suddenly ended - 10% growth. It's not so simple, though: we won't get back to normal so quickly."
Russak-Aminoach continued, "In order to know what awaits us, you have to look back at the state of the economy before Operation Protective Edge. The Israeli economy has actually been in a substantial and prolonged recession; things have been going down since 2010, which was a strong year. We see it in the various macroeconomic data, such as per capita growth, private consumption, and investment. These figures are unrelated to the war that took place."
Russak-Aminoach said that the state of Israel's economy was not good in comparison with the rest of the world. "You could say that the whole world is on a downturn, but even if we compare ourselves to the OECD countries, we see that we're losing our advantage in growth. As a result, the Israeli economy entered the recent conflict at a less advantageous point than in the preceding conflicts, and emerging from it is therefore not easy," she remarked.
Despite her pessimistic outlook, Russak-Aminoach also took note of an optimistic side of the data. "Israel has quite a few assets that are potential growth engines. In the natural gas sector, we haven't yet taken advantage of the potential revenues, which will contribute to growth and the state's royalties. Furthermore, there is a lot of land in the country that can be released. There is more potential in high tech. We haven't yet exploited the full potential in this area," she said, adding, "If we can take the assets we have and make them economic growth engines, we'll see more power and less vulnerability in the economy, and we can also justify a higher deficit."
Published by Globes [online], Israel business news - www.globes-online.com - on September 2, 2014
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