Petrol, property, poverty… the economy matters in this Israeli election

Stagnant wages, the pandemic and Ukraine have turned the cost of living into an election issue. Netanyahu has gone on the offensive and the ball is now in Lapid's court.

Earlier this year, the Governor of the Bank of Israel, Amir Yaron, gave the following description of the Israeli economy: “[It] is in a strong position in a number of respects. Growth is high, the labour market is tight, the government deficit is low, tax revenues are rising, and businesses continue to report an improvement.”

Yaron’s optimism seems difficult to square with Israel’s increasing cost of living and the pressures this has imposed, but his statements are not unfounded. Israel’s annual inflation figures may be at a 14-year high of 5.2%, but this is an enviable figure in comparison with Australia, the UK, US and OECD average.

The Bank of Israel is also right to be encouraged by the quarterly economic-growth figures released this week which showed an annual growth rate of 6.8%. This is an impressive turnaround since the year’s first quarter, when Israeli GDP dropped by 2.7%. It also exceeds Israel’s growth rate before the pandemic.

However, as is often the case in economics, the headline numbers do not tell the full story. Israel’s consumer price index, which determines the inflation rate, does not account for changes in housing prices, which have been a central source of stress. These changes are instead recorded by the Central Bureau of Statistics, which announced in July that house prices increased by 16% in the previous year. This is the highest annual increase in housing costs in a decade.