Copy of The IsraTransfer Report: November 2021
From the IsraTransfer Trading Desk
We have seen an incredible strengthening of the shekel throughout the last month, which accelerated over the past few days. The shekel is the strongest it has been against the dollar since January, and it hasn't been this strong against the Euro in 20 years! Many are calling on Bank of Israel to intervene to temper the raging shekel and prevent exporters from losing money.
The Unstoppable Shekel
At its last meeting, the Bank of Israel voted to keep the interest rate at its current low of 0.1%. Many policymakers believe that lower rates boost economic activity, and the Central Bank views this as a priority considering multiple lockdowns set the country back.
Still, the Israeli economy is going relatively strong, and the Bank's statement implied that a rate hike is on the horizon. But concern about medium-term recovery and the threat of future virus strains influenced the decision to leave the rate alone for the time being.
Similar logic seems to be impacting the Bank of Israel's approach to the strengthening shekel.
Although some experts claim the shekel will continue to strengthen over the long term regardless, the current hands-off approach might be an attempt to prevent a rise in inflation. Inflation is a global issue at the moment, and the strength of the shekel seems to be keeping it at bay in Israel.
The strong shekel is good news for anyone buying items overseas. With Amazon reinstating their free shipping to Israel earlier this month, Israeli consumers are shopping with joy. Exporters, on the other hand, are not so happy. A strong shekel lowers exporters' profits and is a matter of concern for the high-tech industry. Marian Cohen, president of the High-Tech Association of the Manufacturers Association, explained that startup companies rely on exports and are likely to be harmed by the shekel's appreciation.
Time will tell if and when the Central Bank will intervene in the foreign exchange market and to what degree.
Neighborly Ties
A spirit of friendliness is in the air as Israel, and its neighbors, embark on new projects together. While peace in the region remains a far-off fantasy, economic incentives seem to generate a collaborative spirit.
Israel's Ministry of Energy recently announced that talks commenced between Israel and Egypt on building a new pipeline. The onshore pipeline would deliver natural gas to Egypt, thereby boosting exports to Europe. European need for natural gas grew in the past year as lockdowns eased and the economy kicked into full gear. Supplies, still tight from the global pandemic, are in high demand. The move would both benefit Israel's economy while promote diplomacy with Egypt. In addition, it serves to “cement Israel’s position as a key energy hub in the eastern Mediterranean”.
Israel discovered large quantities of natural gas in 2009 and has been exporting supplies to Egypt through an underwater pipeline since January 2020. The pipeline has the potential to double current exports to Egypt. It will run along the northern end of the Sinai Peninsula and be operated by the government-owned Israel Natural Gas Lines company.
In other neighborly news, Israeli ambassador to the UAE Amir Hayek announced that Israel and the United Arab Emirates are moving towards a regional free trade agreement. According to Hayek, “both peoples have proven their abilities to join together and bring about successful cooperation between their countries.” In the year since the Abraham Accords were signed, $1 billion in trade flowed between the two countries. Israel Export Institute chairman Adiv Baruch hopes to increase the amount to $5 billion over the next three years.
Israel and UAE already signed one agreement, the ‘green corridor’ agreement, that is. With covid-19 infections steadily declining, Bennett announced his plan to open borders to vaccinated and recovered tourists. Israel and the UAE signed an agreement to mutually recognize coronavirus vaccination certificates and green passes “without isolation and bureaucracy”, according to Health Minister Nitzan Horowitz.
Is Tourism Returning?
For many citizens with loved ones abroad, the 1st of November couldn't arrive fast enough. Individually travelers will finally be allowed to enter Israel after months of closed borders. The delta variant, which brought summer tourism to a sharp halt, declined enough to convince the government its time to bring back the tourists.
Entry to Israel will be far from a free-for-all as the government attempts to keep out new variants. No visitors from red countries will be allowed in, and there are many restrictions on entry from green countries. For example, tourists from the USA are required to be vaccinated with a second dose or booster vaccine within six months of their trip.
The numerous and ever-changing regulations can be confusing for potential visitors. Yad L'Olim, an organization founded by former MK Dov Lipman, continues to update its Facebook page with all the latest details and information needed to enter the country. The page includes updates and important info such as which documents to bring on your flight, what to do if you don't meet the travel requirements, and more.
Some think that the government's move to open Israel's borders to visitors is too restrictive, and the list of those who will be permitted entry is not enough to revive the tourism sector. Yael Danieli, CEO of the Israel Hotel Association, noted that many countries don't provide booster shots to the general population. In her opinion, the 6-month vaccination period was too much to expect from incoming tourists. There is also the issue with children under 12 entering the country since they can't get the vaccine. Danieli believes that the government should allow individual tourists to enter under the same, less restrictive conditions that apply to groups. The tourism industry, which contributed $7.2 billion to the Israeli economy in 2019, took a hit since the onset of the pandemic. The number of tourists dropped by 80% since the coronavirus began, taking a toll on employment and the economy in general.
Hurray for Aliyah Day!
Aliyah Day was officially established in 2016 to recognize the importance of Jews immigrating to Israel. It is celebrated annually on the 7th of Cheshvan when we read the Torah portion of Lech Lecha in synagogues. This year, Aliyah Day fell on October 13 and, as always, was marked by schools, government ministries, the Knesset, and other institutions.
On this year's Aliyah Day, many noted the uptick in immigration to Israel compared with the year before. Somewhat bouncing back from the Covid-19 setback, aliyah was up by 31% in 2021 so far. The final numbers for 2021 are estimated to fall between 26,000 - 27,000, still lower than pre-pandemic times. The 2020 decline in immigration comes as no surprise. Travel was increasingly difficult due to canceled flights, office closures, and increased instability. In 2021, Russia was the largest source of aliyah, sending 5,075 immigrants. There were 3,104 immigrants from the USA, 2,819 from France, and 2,123 from Ukraine.
While Israel celebrates all Olim, the country is especially keen on encouraging a "tech aliyah" or largescale immigration of Jews employed in a technology field. Engineers are particularly desirable, and the Israeli government is working on a plan to lure them here. The tech industry has been a source of salvation for Israel during the pandemic, helping keep the economy afloat. The country is currently facing a shortage of skilled labor in high-tech industries and is anxious to fill job vacancies.
In Case You Missed It…
Freaky Bus Station Heading for Closure
Earlier this month, transportation minister Merav Michaeli announced that the Tel Aviv bus station, a longstanding eyesore, would be closed by 2024. Israel21 put together a virtual tour of 13 crazy surprises commuters can find in the "white elephant" of a bus station. You can watch the video here.