By Israel (Izzy) Tapoohi
President & CEO
However, another area where Israel deserves top marks – its outstanding success in building a strong economy – is often overlooked. But although economic resilience is perhaps not the first thing people associate with Israel, the Israel Bonds organization works hard to change that perception every day. When the Bonds organization tells its clients investing in Israel bonds is a means of becoming a stakeholder in Israel’s strong economy, it is not a marketing slogan – it is a fact. I highlight the words of Moody’s chief economist Mark Zandi, who in May of this year declared, “The performance of the Israeli economy in recent years makes Israel one of the world’s best economies.”
Since achieving independence, Israel has set a high standard for determination, perseverance and ingenuity. From conquering the desert to prevailing against impossible odds to today’s groundbreaking technological innovations, Israel has redefined resourcefulness.
The Greek debt crisis sets an appropriate context for Israel’s exceptional economic performance. An important point of comparison is the respective debt-to-GDP ratio of the two countries - a key indicator of the strength of the economy, which in turn helps determine credit ratings and interest payments. Greece’s debt is 180 percent of GDP. Israel’s, on the other hand was 67.1 percent as of the end of 2014, marking the fifth straight year its debt-to-GDP has declined. This number is outstanding not only when compared to Greece, but also the Euro Zone average of 107.7 percent, the OECD average of 94 percent, and even the U.S. number of 105.6 percent.
Moreover, as Greece struggles to repay its debt, Israel Bonds is proud to note Israel has never missed payment of principal or interest on a single Israel bond since the securities were first issued in 1951. Additionally, as a recent Washington Post article observes, “Greece’s fiscal situation is widely viewed as a dilemma of its own making after decades of free-spending policies.” Conversely, Israel has been consistently praised for exercising fiscal responsibility. For example, in a statement issued May 8 of this year, Fitch ratings agency praised Israel’s progress in narrowing the deficit to “the lowest (point) since 2008,” as well as “a gradual downward trend” of the debt-to-GDP ratio, and “growth (that) is stronger and less volatile than peers despite occasional conflict-related fluctuations.” And, last fall, Standard and Poor’s declared, “Israel’s core…strengths (are its) prosperous and diverse economy, the contribution of natural gas production to a healthy external balance and its relatively flexible monetary framework.
Proof of Israel’s fiscal discipline can be discerned by the fact that last summer’s 50-day war with Hamas had minimal impact on the economy. The year closed out with Q4 growth of 7.2 percent, which Reuters cited as Israel’s “fastest quarterly growth in nearly eight years.”
According to OECD forecasts for 2015, Israel’s’ GDP is expected to reach 3.5 percent in 2015, as compared to predictions of an average 1.9 percent for OECD member countries. The U.S. economy was projected to grow just 2.0 percent.
Paradoxically, although Israel’s economic achievements may not be on the minds of Israel’s mainstream supporters, they are most assuredly the focus of Israel’s detractors – specifically, proponents of the Boycott/Divest/Sanction (BDS) movement.
In encouraging economic, cultural and educational boycotts, BDS advocates have convinced themselves they can defeat Israel by bringing down its economy. At Israel Bonds, we think otherwise. Following back-to-back years (2013-‘14) in which the Bonds organization exceeded $1.1 billion in U.S. sales alone, we are on track to do it again with over $600 million in 2015 domestic sales. Prior to 2011, that would have constituted sales for the entire year. The continued strong sales are indicative of our proactive approach to strengthening Israel’s economy, which, of course, is the most effective response to BDS. Significantly, these sales comprise a wide spectrum of investors, encompassing individuals, states and municipalities, financial institutions, endowment funds, universities and more. Despite their diversity, each Israel bond investor shares the commonality of acquiring a strong investment; helping Israel’s economy remain resilient; and delivering a resounding ‘No!” to BDS advocates through a direct repudiation of their boycott agenda.
In an ideal world, BDS sympathizers would end their fixation with Israel and turn their attention where it belongs - to the tyrants and despots of the world who force their citizens to live in abject poverty and severe repression. That, however, would obviously be too much to ask.
Nevertheless, as global economies continue to falter, we are gratified that Israel, as it has done in so many ways, continues to stand apart.
(Note: Israel bonds are not rated)