Israel’s Fiscal Responsibility « The Ettinger Report

1. So far – in spite of its reliance on export and overseas investments – Israel has remained a relative island in a global economic meltdown, due to its fiscally-responsible policies:

*Israel’s banking system has been relatively-responsible, scrutinizing loans and mortgages (e.g. lucky home owners receive 60%-70% mortgage).

*No real estate bubble.

*Israel’s budget deficit has been minimal in recent years – 1.2% and 1% of GDP in 2006 and 2007 respectively.

*Inflation has been under control since the 400%+ rates of the 1980s: 2.5% in 2005, -0.1% in 2006 and 3.4% in 2007 (largely due to rise of price of commodities and oil, which has recently subsided).

*Interest rate (currently 3.75%) has been around 4%.

*Government expenditures/GDP ratio has declined to lowest level since late 1960s – 44.9%.

*Debt/GDP ratio has been shrinking from 95% in 2005 to 80.6% in 2007.

*Declining tax rates.

*Solid Shekel – currently 3.7 per $, 3.5 during 2007, 4.3 in 2006.

2. Israel constitutes an attractive post-meltdown market, due to the aforementioned fundamentals, in addition to its unique high tech industries, which are top heavy on cutting-edge engineering and tangible technologies/products and low on dot.com companies. While the scope of overseas investment, in Israel, has declined substantially, due to the meltdown on the investors’ side, the flow of investment by astute investors persists. They invest in lower market valuations, expecting attractive “Exits” during global economic recovery.

3. Oracle has acquired Israel’s Primavera (550 employees), which is Oracle’s 2^nd R&D center in Israel. The first one was acquired in 2006 (Globes, Oct. 20, 2008). The Swiss giant Von Roll has acquired 80% of Israel’s Enerco for $75MN (Globes, Sept. 17). The New Jersey-based Phibro Animal Health, a global leader in medicated additive feed, acquired Israel’s Avik for $47MN. Phibro operates two plants in Israel (Globes, Oct. 17).

4. GE Pension Fund, IBM and Caisse de Depot et Placement du Quebec have been among the investors in Israel’s Genesis VC’s 4 funds. Genesis has recently completed its $100MN 4^th fund (Globes Business Daily, Oct. 23).

5. Greylock Partners raised additional $50MN to their current ($150MN) Israel-dedicated fund (Globes, Oct. 8).

6. Morgan Stanley, Cisco and Europe’s Index Ventures co-led a $63MN 4^th round by Israel’s Optier (Globes, Sept. 24). Japan‘s Pacific Technology Fund led a $20MN 3^rd round of private placement by Israel’s Altair (Globes, Sept. 23). Spark Capital and Red Point co-led a $13MN 2^nd round by Israel’s AdaptTV (Globes, Sept. 24). Canada‘s Blackberry Partners launched its initial three investments, one of them in Israel’s WorldMate – leading an $8MN round of private placement (Globes, Oct. 30). Silicon Valley Bank has extended an $8MN credit to Israel’s Mintera (Globes, Oct. 20). River Cities Capital and Early Stage Partners led a $7MN round by Israel’s Simbionix (Globes, Oct. 20). Britain‘s GP Bullhound Sidecar and dotCorp Assets Management invested $5MN in Israel’s MyThings (Globes, Oct. 16). Bessemer and Mangrove invested $3.5MN in Israel’s Wix (Globes, Oct. 16).

Straight from the Jerusalem Boardroom #248
https://bit.ly/3u29k9g

Foreign investment in Israel’s high-tech companies surged to new heights in the 1^st quarter of 2021 – $5.7bn in 172 deals – which is up 89% over the impressive 4^th quarter of 2020 and double the volume of the 1^st quarter of 2020.

2020 was the first year of surpassing $10bn in capital raised by the Israeli high-tech sector from investors in the US, Asia and Europe, who trust the maturity of Israel’s brain power. Investments in Israeli companies more than tripled in six years, reflecting the effective response by Israeli startups to the technological, medical, pharmaceutical, educational, social and digital challenges posed by Covid-19.

Israel’s economic performance in defiance of Covid-19 is presented by Dr. Adam Reuter, the Chairman and Founder of “Financial Immunities,” Israel’s largest financial-risk management firm, and the co-author of Israel – Island of Success:

Israel has led the globe in the rapid administration of Covid-19 vaccinations due to effective negotiations with Pfizer and an efficient, country-wide medical infrastructure.
Israel is the second lowest among OECD countries in the number of Covid-19 deaths per number of Covid-19 cases: 0.7% compared to the 2.3% OECD average. Israel features a young population (median age of 30 compared to the OECD’s 42) and an effective country-wide medical infrastructure, including top level HMOs and hospitals.
Israel is ranked 12^th from the bottom among the 37 OECD countries in the number of deaths per million inhabitants: 645 compared to 1,145 OECD average.
The International Monetary Fund’s 2025 GDP growth forecast for OECD countries: Israel – 4%, OECD average – 2.2%, US – 1.8%, Australia – 2.5%, Ireland – 2.6%, France and Canada – 1.7%, the UK – 1.6%, Germany – 1.2%, etc.
Israel’s 2020 GDP was reduced by 2.5%, compared to the OECD average reduction of 4.1%, South Korea – 1%, Norway – 0.8%, Australia – 2.6%, US – 3.5%, Japan – 4.8%, Germany – 5%, France – 8%, the UK – 10% reduction, etc. GDP growth was recorded in New Zealand – 2.4% and Ireland – 3.5%.
In 2020, Israel was ranked 20^th among the 37 members of the OECD in terms of GDP per capita, featuring $43,000 (GDP – $408bn), ahead of Japan, Italy and Spain, and very close behind the UK ($44,000) and France ($45,000).
Israel’s debt-to-GDP ratio increased from 60% in 2019 to 72% in 2020, compared to the OECD’s average increase from 66% to 82%. The 2020’s debt-to-GDP ratio was 266% in Japan, Italy – 161%, the US – 131%, Germany – 73%, etc.
Israel’s foreign exchange reserves-to-GDP ratio of 41% (3^rd among the OECD countries) attests to its financial stability, and Israel’s capability to raise foreign credit promptly in a cost-effective manner. Israel’s foreign exchange reserves in March 2021 – $186bn.
During the past decade, Standard and Poor (S&P) accorded Israel a positive credit rating trend, unlike the negative trend for the G-7 countries. In 2020, notwithstanding Covid-19, Israel’s credit rating (S&P) remained at AA.
Some 380 global high-tech giants operate in Israel, including Microsoft, Amazon, IBM, Intel, Cisco, Apple, Verizon, Applied Materials, Dell, HP, Kodak, Oracle, Philips, SAP, Medtronics, GM, eBay, GE, etc. Israel leads the world in the ratio of research and development investment to GDP: 4.9%. 85% of this investment comes from the business sector.

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