Update: Israel and Hamas agreed to a cease-fire on Wednesday, Nov. 21, after eight days of fighting.
Investors shouldn’t allow the current conflict in Gaza Strip to undermine their confidence in the Israel‘s economic prospects, the country’s top diplomat in the U.S. for economic affairs said Nov. 19 in Atlanta.
In what it called a response to rocket attacks targeting Tel Aviv and other southern cities, the Israeli government Nov. 14 launched Operation Pillar of Defense, an air and naval assault targeting long-range rocket installations in Gaza and aiming to cripple the command structure of Hamas, which rules the Palestinian territory.
Since the campaign began, more than 2,000 rockets have been fired into Israel, according to a Nov. 20 update from the Consulate General of Israel to the Southeast. The Israel Defense Forces have destroyed more than 1,000 targets in Gaza, including Iranian-supplied installations that can launch rockets up to 40 miles, sending about half of Israel’s 7 million people into shelters, the consulate said.
Israel has not ruled out a ground operation, and its government has authorized the Defense Forces to call up 75,000 additional troops.
Such flare-ups, much like the 2006 war with Hezbollah in Lebanon, are one of the risks of doing business in Israel, but the costs of short-lived conflicts are far outweighed by the long-term benefits of a country known for innovation and resourcefulness, said Eli Groner, minister for economic affairs at the Embassy of Israel in Washington.
“As we’ve learned in many areas in life, if you want to have some sort of ability to predict the future, the first place you need to look is the past,” Mr. Groner told Global Atlanta. “If you look at Israel’s past performance in weathering military challenges, you’ll see that Israel’s economy and our financial markets are remarkably stable.”
With strong trading relationships with the United States and Europe, Israel has a long track record of prospering despite its belligerent neighbors, Mr. Groner said, adding that some investors have even profited from betting on Israeli assets during conflicts.
“There are short-term movements, of course. Savvy investors recognize that historically, those are opportunities to buy on the dip, and people with longer-term horizons recognize that Israel is a great opportunity,” he said.
Israel’s economy expanded even during the worst of the global financial crisis. Last year it posted 5.4 percent growth in gross domestic product. This year, growth is poised to drop to about 3.2 percent, still outpacing the U.S. and most of Europe, some of which remains mired in recession as the continent deals with its sovereign debt crisis, Mr. Groner said.
Israel’s export-based economy can’t help but be adversely impacted by flagging demand in developed markets, but two global “megatrends” match Israel’s industrial “sweet spot,” brightening the country’s prospects for the future, he said.
Rising health care costs will create the need for more sophisticated medical devices and generic drugs, two areas where Israel excels. President Obama‘s reelection means his signature health care law is all but certain to go forward in its current form. That’s good for Israel, as adding coverage for millions more people will bring more pressure to address costs, Mr. Groner said.
In the past few years, health-care information technology companies from Israel have come to Atlanta in search of partners. A move to electronic medical records is also a key requirement of the Obama health-care law.
The specter of dwindling natural resources around the world also opens the door for Israeli clean-energy innovations, which the country is ramping up to reduce dependence on oil, most of which is produced by countries that oppose Israel, Mr. Groner said.
“The oil cartel is sustained by the transportation industry, and that needs to be addressed,” he added.
Mr. Groner spoke to Global Atlanta at the Israeli consulate general during a trip to Atlanta to provide updates to the community on the current situation in the country.