Finance Minister's Unprecedented Intervention Raises Concerns Over Israeli Economy

In an unusual move, Finance Minister Bezalel Smotrich has drawn criticism for his involvement in shaping a key economic report, raising concerns about the independence of professional economic analysis in Israel. The report in question, mandated by a recent amendment to the law, requires the Ministry of Finance to provide a preliminary estimate of economic forecasts in September for years with a two-year budget, such as the current 2023-2024 budget.

Dr. Shmuel Abramson, the acting chief economist at the ministry, was tasked with preparing the report. Despite meeting all the necessary qualifications for a permanent position, Dr. Abramson's tenure has not been confirmed, leading to speculation that his loyalty and independence are being tested. This situation highlights the critical role of a professional chief economist, as their estimates and forecasts have significant implications for the country's fiscal policies.

The Finance Minister's intervention has caused consternation among experts, who argue that economic analyses should be conducted exclusively by professionals without political interference. The official report, while cautious, mentioned that the Israeli economy displayed resilience in the face of various challenges. However, Minister Smotrich added a political preamble to the report, asserting that the economy had withstood efforts by "irresponsible parties" to harm it as part of a political struggle against the government's policies.

Economists warn that such political interference could have negative consequences for the Israeli economy, potentially affecting investor confidence and international ratings. They emphasize the importance of maintaining trust in the professional bureaucracy and warn against attempts to undermine it, as such actions have historically led to economic instability in other authoritarian populist regimes.

The Israeli economy, particularly the high-tech sector, heavily relies on foreign investment, making the maintenance of international trust crucial. Experts caution that losing trust can happen quickly, while regaining it takes years, and urge Minister Smotrich to refrain from politicizing economic data to avoid causing irreversible damage.