It has been a turbulent time of late in Israeli politics. Prime minister Benjamin Netanyahu was recently indicted on charges of bribery and fraud, and efforts to form a coalition government, in the wake of September 2019’s tight election results, have completely fallen apart. Israelis now face the possibility of their third general election within a year.
But while the political scene may have been foundering, the economy has been holding up well. Gross domestic product grew by 3.4% in 2017 and 3.3% in 2018, compared with average growth across Organisation for Economic Cooperation and Development countries of 2.4% and 2.2% respectively, in each year, according to World Bank data.
Israel’s banks have also been performing steadily in the past few years. Pre-tax profits at Bank Hapoalim, Israel’s largest bank by Tier 1 capital, for example, have remained at around $1.3bn since 2015. Bank Leumi, the country’s second largest, has seen profits grow from $1.12bn in 2015, to $1.31bn in 2018. Israel Discount Bank, which is about 50% smaller by Tier 1 capital than the two leading banks, saw its pre-tax profits steadily grow from $352.6m in 2015 to $623.7m in 2018.
Non-performing loan ratios, starting from an already low base, have also declined over the past four years. Bank Hapoalim’s fell to 1.23% (from 2.2%), Bank Leumi’s fell to 1.36% (from 1.7%) and Israel Discount Bank’s fell to 1.24% (from 2.53%).
However, with the political turmoil expected to continue, Israel’s economy may start to take a hit. Government action seems needed to tackle the budget deficit – but this will not be possible until there is a fully functioning government in place.
