Israelis suffer from high prices as a result of the war on Gaza (Al Jazeera)

A new wave of price hikes hit Israel last December, with food manufacturers and importers Willie Food, Strauss, Chastowicz and Wissotzky raising between 15% and 25% on some products, as of Thursday, according to what the Israeli economic newspaper Globes reported.

Companies say they are forced to increase prices, due to rising prices for raw materials from suppliers against the backdrop of Houthi attacks on ships in the Red Sea and rising shipping costs, and the weak shekel makes importing more expensive, Globes reported.

The newspaper quoted a statement by food importer G. Willy issued last week, saying, “Due to the significant increase in sea freight prices, the Iron Sword War (the Israeli name for the war on Gaza), and the international crisis caused by the Houthis in Yemen, container shipping prices rose from $1,500 to $7,200.” $, and shipping time doubled.

Blame the government

For his part, Israeli opposition leader, Yair Lapid, said in a tweet on the X website, “The government is also destroying the economy. Sharp increases of 20% in the prices of basic products, and there is no one to manage the matter. The Israeli middle class is collapsing under the burden, and they are distributing money to each other.” ".

Michel Fink, Deputy Director of Strategy and Policy Planning at the Ministry of Economy and Industry, told the Knesset Economic Affairs Committee last week that there is a large gap between Israel and other OECD countries, amounting to between 20% and 30%, in the rise in prices. As quoted by the newspaper.

For its part, the market accuses the Israeli government of causing the price hike, which market participants say burdens them with costs, starting with the value-added tax rate of 17%, (in many other OECD countries there is no value-added tax on food ), to taxes, fees, halal requirements (in the Jewish religion), and high energy and fuel costs, all of which contribute to high prices.

Infographic of Israel's economic losses due to the Gaza War (Al Jazeera)

The newspaper quoted a market source as saying, “While food companies are under scrutiny due to raising prices, no one is dealing with the reasons for the significantly high cost of living in Israel... Food is expensive in Israel compared to the rest of the world, not for these reasons, but because of state policies.” In In the past decade, average wages have risen much more than food prices, and the general consumer price index has risen by 10%, while the food component has risen by a smaller rate. The state is not dealing with what could solve the problems. Why is VAT applied to food in Israel, unlike Other countries where the VAT rate on food is zero or reduced and now they are raising it by another 1%? The state maintains a quota system that harms Israeli agriculture, including honey, milk and eggs. Why do we need egg quotas?

He adds, "In other countries, taxes on capital are raised, in an attempt to protect the most vulnerable segments of the population. There is no reason for Tnuva (an Israeli company for egg and milk products) to buy raw milk at a price 35% higher than the price of a dairy farm in Germany, as if That was not enough, as factories operate only 5 days a week for reasons related to kashrut (Jewish teachings). The state does not help farmers, and allows local authorities to collect taxes and impose others on energy.”

Planning

The newspaper quoted the same source as saying that most companies were planning for the recent rise in prices after the Jewish holiday season. He added, "The rises froze after October 7, but everyone realizes that the war will continue for a long time, and now Easter is approaching, and they have no choice but to raise some prices."

As for the declines in prices of raw materials, the source says that they came after much larger increases during the year, adding, “There are products for which we pay more than we paid at the beginning of last year by more than 10%. Sugar has become more expensive by 27% in the past year, and the exchange rate may have decreased.” "The dollar, but that is after it reached its peak. The importer is still paying 7% more than last year. So it is easy to say that the dollar exchange rate has declined, but it is higher than it was last year."

The newspaper quoted Uday Pinhas, CEO of Commodex Advisory Company, which specializes in hedging and trading in commodities and raw materials, as saying that a decline in prices is not on the horizon at the present time, as cocoa prices have reached their highest levels ever at 3,800 pounds sterling per ton, compared to 2,000 pounds sterling. Last year, sugar reached a peak not seen in more than a decade, at around $700 per ton, compared to $500 a year ago.

He added, "In the dairy, corn and wheat industries, there was a decline this year, but most of that was compensated for by freight premiums, due to the war (on Gaza). The current decline in raw material prices is mostly slight."

Pinhas confirms, “Most goods do not pass through the Red Sea,” the newspaper quoted him as saying.

Source: Al Jazeera + Israeli press