What's behind Israeli economy's historic growth numbers?

Analysis: 2021's impressive growth numbers have Finance Minister Liberman taking victory laps, but how can we reconcile this with public outcry over soaring cost of living?

Gad Lior|
The COVID-19 crisis is still upon us, forcing hundreds of thousands of Israelis into quarantine in recent months and many of them saw their financial fortunes shift for the worse. Businesses are crying out for help, and prices keep soaring. In theory, this all points to a very bearish market, but just in theory.
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  • Economic growth data released on Wednesday has shown that the Israeli economy has recorded its most significant boom since the turn of the century, registering record-breaking growth over the last quarter of 2021.
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    אביגדור ליברמן
    אביגדור ליברמן
    Finance Minister Avigdor Liberman
    (Photo: Yariv Katz)
    So what's up with that? Is the state of affairs in the Israeli economy really that bad, or really that good? Well, it depends who you ask.
    The Finance Ministry is smiling from ear to ear. Minister Avigdor Liberman stubbornly rejects "throwing money out of a helicopter", as he likes to blame the former government for doing, while repeating the same mantra — "Everything's great", and sometimes even adds the word "paradise" to his routine.
    While public sentiment says one thing, with protests against the cost of living spreading like wildfire, Liberman sings a whole different tune.
    An economy that records an 8.1% annual growth is definitely not "in distress." The Germans, the Brits, the Spanish, and even the Americans are green with envy with us.
    Consumption was up 19.2% in the last quarter of 2021, and 11.7% in all of last year. This a shopping bonanza the like of which we haven't seen in a long, long time. It seems that whatever the Israelis held back in the first year of the pandemic, they're making up for now.
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    המסעדה של איציק קדוש ריקה בשל הקורונה
    המסעדה של איציק קדוש ריקה בשל הקורונה
    Empty restaurant during lockdown
    After thousands of deaths and three lockdowns that crippled the market, consumer morale has hit an all-time low. How can you be in a mood to buy a new couch or a fancy fridge, especially if you can't even have family and friends over?
    But then came the second year of the pandemic and lockdowns were lifted for good. The economy opened almost entirely — all the reason to splurge your hard-earned cash on that couch you've been eying since 2019, and you know what... throw that fridge in the cart too while you're at it.
    Even businesses that previously saw their footfall collapse entirely, suddenly picked themselves up off the ground. Customers returned hungrier than ever, looking for any excuse to go out shopping, to eat out, to go to the movies or enjoy a concert. Families and friends were allowed to meet again. Society started to internalize that COVID isn't going anywhere, and now's the time to learn to live alongside the virus.
    Likewise, Israeli industry and importers also emerged from the pandemic with flying colors: the exports of goods and services skyrocketed by 26.3% in the last quarter of 2021!
    The fact that the state budget was approved for the first time in nearly four years also helped economic growth. Suddenly, personal consumption expenditures rose by a whopping 17.3% in the last quarter of 2021. But still, owing to a turbulent start of the year, the total increase in that parameter clocked in at just 2.9%.
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    תורים בנתב"ג
    תורים בנתב"ג
    Lines at the airport in Israel
    (Photo: AFP)
    The Central Bureau of Statistics, a neutral apolitical body, has listed a few other reasons behind the surprising numbers:
    Israelis hardly traveled abroad during the pandemic and spent all that spare money back home.
    The stagnation of 2020 prompted companies and the government to overcompensate in 2021, with new policies, strategies, products, etc.
    As for the future, the market is expected to continue recovering, save for a catastrophic event such as a war or a super violent variant. However, these record-high numbers can't last forever and would be almost impossible to top.
    Therefore, while we can expect to see growth throughout the next few months, it'll pale compared to the numbers we've seen in 2021.
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