A prominent economic analyst has warned that Israel’s economic boom is a bubble destined to pop, and that hard times will follow.
“Sadly, Israel’s economic boom is not the miracle that it appears to be, but is actually another bubble that is similar to those that caused the financial crisis,” wrote Jesse Colombo in Forbes. Colombo has been with predicting the global financial crisis and is currently raising the alarm about other economic bubbles.
Israel’s bubble is most likely to pop when global and local interest rates rise as the global economy appears to recover, Colombo says. At that point, housing prices will fall, there will be a wave of startup failures, banks will suffer losses on their mortgage portfolios, and technology and banking stock prices will fall dramatically, dragging down the overall stock market. If there were not bad enough, he predicts that unemployment will rise and economic growth will “go into reverse.”
“Like many nations outside of the hard-hit U.S. and Europe, Israel’s inflating housing bubble helped to boost the country’s consumer spending in the wake of the global financial crisis,” he writes. “Unfortunately, this wealth effect is not sustainable and will actually reverse when Israel’s housing bubble pops.”
International high-tech companies are making the same mistakes in Israel as they are in Silicon Valley, writes Colombo: overpaying for “speculative startups with little to no earnings,” which he says is a throwback to the late-1990s dot-com bubble.
Both are likely to pop at the same time, warns Colombo.
“The popping of the Israeli tech bubble is likely to coincide with the popping of the tech and stock market bubbles in the United States,” he writes. “Israel has experienced a tech wreck once before when the collapse of the late-1990s dot-com bubble (combined with the 2001 Israeli-Palestinian conflict) helped to push the country’s tech-heavy economy into the worst recession since 1953.”