A comprehensive report released by the Organization for Economic Cooperation and Development (OECD) last Friday has ignited a flurry of impassioned reactions pertaining to the government's policy regarding the burgeoning challenge of the cost of living. This report, which casts a revealing light on the state of affairs, indicates that as of 2022, Israel has ascended to the dubious honor of occupying the top rung in the cost of living hierarchy. While these unpalatable statistics pertain to the year 2022, a time when the cost of living skyrocketed to its zenith, they are emblematic of the cumulative negligence that has beset the issue over numerous years.
The ranking methodology adopted by the OECD, one that assesses the cost of living through the prism of purchasing power, exposes the disconcerting fact that the price levels in Israel surpass those of its OECD peers by a staggering 38%. To put this into perspective, this chasm dwarfs the difference between Israel and a nation like Great Britain, often deemed relatively high-priced, which stands at 33%. Furthermore, Israel's cost of living eclipses that of the United States by an average of 13%, and Canada by 21%. Evidently, the three most economical countries among the advanced economies in 2022 were Turkey, India, and Colombia.
The latest price level indices chart from the OECD shows Israel most expensive country, with Turkiye the most affordable. pic.twitter.com/2dsbggpEjt
ā Ittay Flescher (@ittay78) August 26, 2023
Dr. Ron Tomer, President of the Israeli Association of Manufacturers, responded to these disconcerting findings with a pointed observation: "The report underscores that Israel grapples with a slew of structural impediments that contribute to the perceptibly elevated price levels compared to the global arena. Escalating housing costs, an elevated value-added tax (VAT) on food items, the dearth of direct agricultural subsidies, and burdensome regulatory measures collectively conspire to drive prices upwards. This conundrum is compounded by the statistical distortion arising from the fluctuations in exchange rates throughout 2022."
Chen Herzog, Chief Economist at the consulting firm BDO, echoed this sentiment: "Israel's descent in the global cost of living index serves as a stark indictment of the successive inadequacies of Israeli governments in addressing the underlying afflictions of the national economy. Since the inception of the social unrest over a decade ago, governmental administrations have consistently sidestepped the foundational challenges of housing supply, infrastructure development, and bolstering economic productivity. Instead, they have favored populist remedies over confronting the root of the predicament."
Israel's price levels were 38 percent higher than the OECD average in 2022https://t.co/TapF0z4ODq
ā Haaretz.com (@haaretzcom) August 27, 2023
Conversely, the research unit of the Manufacturers' Association, which meticulously scrutinized the OECD report, has arrived at a contrasting perspective. They assert that as the report pertains exclusively to the year 2022, the data it proffers is substantially influenced by the formidable appreciation of the shekel, which reached its zenith during that period. Regrettably, this analysis fails to encapsulate the events of 2023, a year marked by a pronounced weakening of the shekel.
