“The resilience of the high-tech sector is much stronger than it was in the dot-com crisis in 2001,” said the Governor of the Bank of Israel, Prof. Amir Yaron, at the Eli Horowitz Conference on Economics and Society. Yaron devoted a significant part of his lecture to analyzing the high-tech sector in Israel, which he says has long been not an adjunct of the Israeli economy but an important part of the economy and that it constitutes “10% of employees, 25% of income tax, over 50% of exports and 15% of GDP.”
Yaron presented an analysis that compares the current crisis in high-tech to the dot crisis. Get up in the early 2000s. Yaron claimed that the situation in the high-tech sector today is fundamentally different in several respects “at the time of the dot. Com, the companies’ revenues and profits were very low. Today we see – at least in public companies – an increase in revenues and profits.” In addition, Yaron claimed that today “the decentralization of high-tech companies is much larger, they are spread over different areas, and a large majority of the companies are already in the production stage.”
However, Yaron stressed that “I do not want things to be interpreted as if I say there will be no slowdown at all, we are already seeing a slowdown in the volume of recruitment, and we have heard of companies that have frozen recruitment, but the sector is more resilient.”
This was not Yaron’s only optimistic message, already at the beginning of his speech he referred to political developments and said “Economy likes stability, and does not like instability, but Israel has an institutional system that allowed the economy to function properly even during elections. Political certainty. “
Yaron called for fiscal restraint during the election period, and said that the low deficit data must not be dazzled. “Much of this is due to high taxes related to real estate and high-tech. The rigid linkage mechanisms of wages to inflation This leads to a spiral of wage prices. “
Regarding the activity of the central bank in the face of inflation, Yaron did not elaborate, but reiterated that “we will work resolutely to return inflation to the target, this is not a process that will take a month.” Yaron rejected the claims as if all inflation was imported from outside and said “a large part of inflation is also in the non-negotiable tier, inflation is already in many items in the index.”
Yaron listed five factors that led to low inflation in Israel compared to internationally, “We started with high price levels, the rate of wage increases was slower, the shekel strengthened relative to other currencies, energy prices in Israel did not rise due to long-term contracts.” More compared to other countries. ” Yaron presented the latest forecasts for inflation in Israel, which show that in the second half of 2023, a return to the inflation target will begin.
Yaron dedicated the end of his remarks to a full presentation of the Bank of Israel’s position on the issue of investment in infrastructure, an issue that caused senior finance officials to speak out this morning sharply against the idea of an infrastructure fund. Yaron said, “In the short term, it is right to cancel the entire expenditure, and move to the target of a turnover-adjusted structural deficit. And in the long term, it is right to set aside for a non-budgetary fund that will be a source of required investments.”
“We know that there is a risk that the fund will be used to finance non-infrastructure expenditures (due to political pressure), one of the ways to deal with this risk is to adopt the recommendations of international bodies and establish an independent fiscal council.” , Because the idea of an independent fiscal council also infuriates the Ministry of Finance, since it is a matter of taking powers from the Ministry of Finance to another professional council.
“High-tech has not reached the periphery and that is a shame for the whole industry”
“You can look at Israeli high-tech and say that it is 10. And it is indeed, 10% of the labor market, with 17% of GDP, but it is also minus 10: it affects only 3% of the residents of the Negev and 6% of the residents of the north. “High-tech has not reached the periphery and it is a shame for the entire Israeli high-tech industry, for the state and for the institutions involved in the issue,” according to the chairman of the Knesset’s Economics Committee, MK Michael Bitton (blue and white) at the Horowitz Economics Conference.
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Chairman of the Economics Committee Michael Bitton
(Photo: Knesset Spokeswoman Noam Moskowitz)
MK Bitton said that a multi-year plan funded by the state in the amount of more than NIS 624 million to expand the supply of high-tech workers from the periphery yielded poor results, with most of the money flowing to only 5 companies, and most of the money, NIS 300 million allocated to one company. “Even if they hired 180 high-tech workers from the periphery.” Even if they built a villa for everyone at a price of NIS 1.5 million and promised everyone a salary in advance for 5 years, better results could have been achieved, “he remarked.
He added that “it hurts even more than that, 75% of Israel’s cyber and intelligence servants belong to the highest socio-economic clusters, between 7 and 10 and this is a high-tech entry ticket. “That the country will have an economic celebration around high-tech and will not have inclusive growth that will benefit everyone.”
In a conversation with the President of the Israel Democracy Institute, former MK Yohanan Plesner, the chairman of the Economic Affairs Committee, Bitton also addressed the problem of political stability in Israel: “The damage caused is enormous,” he said. , Israel’s credit rating in the world and more and citizens are already tired of this situation. They are tired of us, they are called to the polls for the fifth time in 4 years. “At the moment, the situation seems lost.”
Business sector presidency chairman Dubi Amitai, who also attended the conference, said in reference to the political situation that “in the absence of a state budget for 2023 I call on the professional echelon in the Ministry of Finance and the Histadrut to sit down together around the table to formulate proper economic policy. We have signed a package deal for stability and at the moment the political situation does not allow certainty for the business sector and the general public. “