Israel ranked first place in a list of developed countries with the highest cost of living in 2022, data published Sunday by the Organization for Economic Cooperation and Development (OECD) showed.
In Israel, prices were 38 percent higher than the average in OECD member countries, according to the comparative index, which analyzes differences in the general price levels of countries as measured by consumer price indices and ratios of purchasing power parities to market exchange rates. In second place in the ranking table was Switzerland, closely followed by Iceland, then the US in fourth place.
Israel’s economy is characterized by over-concentration in some sectors, like food and household goods, compared to other markets. From 2015 to 2020, the market share of the 10 largest suppliers in the food industry and in the field of consumer products was about 54% on average, and the supplier with the largest market share in 2020 held about 12% of the total food market, according to a State Comptroller report. The prices of some basic consumer goods, including milk, bread, and cheese are between 50% to 70% more expensive in Israel versus average price levels in OECD member countries.
Commenting on the OECD data, the head of the Israel Association of Manufacturers, Ron Tomer, said it showed Israel has a number of structural problems that lead to higher prices than in the rest of the world. Tomer cited foreign exchange rates as one of the main contributors.
“Housing prices, the high VAT rate on food, and the lack of direct support for agriculture, and heavy regulation drive prices up,” said Tomer. “The Israeli food industry must be supported and encouraged along with an immediate VAT reduction on food products to the level accepted in Europe.”
In recent months, the right-wing government led by Prime Minister Benjamin Netanyahu has been harshly criticized for neglecting to address rising prices while focusing on its contentious judicial overhaul plans. In response, the government in June announced the formation of a ministerial committee to tackle the high cost of living.
Chaired by Netanyahu, the panel includes 13 ministers, overseeing the following ministries: finance, economy, agriculture, environmental protection, energy, health, welfare, religious services, housing, development of the Negev and Galilee, tourism, immigration, and communications.
Israelis are struggling to make ends meet with rising costs of living, while economic growth forecasts have been cut and investments are hampered by the uncertainty surrounding the government’s plan for the judicial overhaul and a slowdown in the global economy. That’s as interest rates have steadily been rising over the past year, making mortgages and loans more expensive.
The Israeli public is mostly concerned about the high cost of living, according to a survey published by the Israel Democracy Institute earlier this year. It showed that two-thirds of respondents think food prices are the most significant factor, and around half blame housing costs, and 29% indirect taxation.
The majority of the public believes that the high cost of living is the fault of the government’s lack of action. Only 27% blame the large monopolies, and 3-4% attribute responsibility to local manufacturers, importers, or supermarket chains, the survey found.