Bank Leumi CEO: "The state is not doing enough to realize the upside after the attack on Iran"

“Israel is at the beginning of a period with the potential for significant change,” said Hanan Friedman, CEO of Bank Leumi, at Calcalist and Bank Leumi’s National Economic Conference.

“We are just a few weeks after the successful operation in Iran. The ongoing war, which began with the events of October 7, and even earlier during the Coronavirus crisis, have taught the Israeli economy a lesson or two in crisis management. There is no doubt that in times like these, experience in managing under uncertainty, resilience, and the ability to adapt have proven themselves invaluable.”

Friedman praised the Bank of Israel and Governor Amir Yaron for consistently ensuring that the economy could continue to grow despite the war. “For example, we saw how during the operation in Iran, Supervisor Daniel Hahiashvili, with the Governor’s full backing, decided that not a single business day would be canceled. This sent a very important signal and was highly appreciated by global markets,” he said.

“On June 15, I received two calls from CEOs of major global banks who offered to increase our liquidity lines. I thanked them and told them there was no need, we were operating as usual,” Friedman noted. According to him, Israeli banks continued to keep the economy running even during wartime.

“The Israeli economy has fundamental strengths, such as steady population growth, low unemployment, the thriving high-tech sector, and natural gas reserves. These, together with the Bank of Israel’s prudent policy and new regional opportunities following the Iran operation, create enormous potential. Some of this potential has already been reflected in investor sentiment, explaining the significant rise in the stock market and the strengthening of the shekel. But there is still untapped potential. To realize it and keep the economy growing at an accelerated pace, we cannot rely solely on the business sector.”

“The state must invest more in building a growth-supportive environment that enables this upside to materialize following the removal of multi-sector threats that have weighed on long-term growth in recent years. At present, the government is not doing enough to unlock this potential,” he said. He pointed to key areas that have been neglected, such as electricity and transportation infrastructure. “Current plans for electricity production do not account for the surge in consumption expected from the AI revolution. In transportation, the periphery remains disconnected, traffic jams are worsening, and the resulting economic damage is enormous. Massive investment could turn these challenges into opportunities, but right now there are no signs the government is preparing accordingly.”

Friedman also warned about complacency in innovation, the economy’s main growth engine. “The capabilities developed by the military have proven themselves in the field, and the stock market responded with a sharp 8% jump. But if we fail to translate this security advantage into systematic investment in technology, education, and civilian innovation, we risk wasting this momentum.”

“In the first week after the Iran strike, the Tel Aviv 125 index jumped about 8%. In financial terms, this means the market value of all companies in the index rose by about NIS 90 billion in just a few days. In cold economic terms, even in short-term cost-benefit terms, the war with Iran, which cost about NIS 20 billion, yielded an immediate upside worth at least five times that. I believe this perspective demonstrates the enormous potential facing Israel’s economy if things are managed wisely.”

Friedman concluded: “The State of Israel should draw inspiration from this and invest the necessary resources in the right places to support future growth, through education, technology, and innovation. It has already been proven that the return on investment is immense.”

“Although the business sector drove the economy forward during the crisis, the country cannot afford to keep faltering. A real partnership between the government and the private sector is essential to secure a strong economic future, otherwise, the potential will be lost and opportunities will slip away.”