Tel Aviv, Israel: The results of Tuesday’s election could be seen as successful damage control for Israel’s international brand image, and an expression of dissatisfaction on the economy, but a new coalition government is unlikely to improve prospects for peace with the Palestinians, analysts have told Al Jazeera.

Incumbent Prime Minister Binyamin Netanyahu claimed victory after his Likud- Yisrael-Beiteinu alliance won an estimated 31 seats in Israel’s 120-member Knesset, according to exit polls.

“We need to construct a wide government, which I’ve started to do already,” he told cheering supporters on Wednesday.

Likud lost about 20 percent of its seats compared to the 2009 election.

Many view Yesh Atid (There is a Future) as the campaign’s biggest winner. It’s projected to take 19 seats, according to exit polls. The party’s leader, former television journalist Yair Lapid who is seen as a centrist, will likely join a coalition government with Netanyahu.

“If anything, Israelis voted for two status-quo parties,” Dimi Reider, contributing editor to 972 magazine and associate fellow at the European Council of Foreign Relations, told Al Jazeera. “They voted for Likud, which created the status quo [including a non-existent peace process with the Palestinians] and Yesh Atid, the party that is least likely to change the status quo.”

Projections showed right-wing parties with a combined strength of 61-62 seats against 58-59 for the centre-left. Thirty-two parties ran in the election and voter turnout was high compared to previous elections.

'Pressing issues'

“The people of Israel… want a country that deals with pressing issues including housing reform and education reform,” Rabbi Dov Lipman, a Yesh Atid politician, told reporters.

The campaign focusing on domestic issues resonated with voters, Lipman said. Prior to the vote, many observers thought concerns about Iran’s nuclear programme and prospects for peace talks with the Palestinians would play a larger role in the campaign.

The Labour party, which also focused on the economy, polled third with 17 seats. Jewish Home, a nationalist party headed by former Special Forces commando Naftali Bennett is predicted to come fourth with 12 seats, in a result that surprised many analysts.

Prior to the election, the far-right was expected to make major gains.

“If anything, there was a shift away from the right to the centre,” said Yehuda Ben Meir, research fellow at the Institute for National Security Studies in Israel.

“I think the clear coalition partner for Mr Netanyahu is Mr Lapid” and Jewish Home is also likely to be included in the new government, Meir told reporters at a press briefing.

Others disagree with Meir’s analysis and backroom negotiating over which parties will form the governing coalition is likely to continue for the next several days.

The new-right was supplanted by a party representing Israel’s traditional centre primarily because of economic concerns, voters and analysts said.

“People feel they need a change in the economic situation,” Hila Fishov, a student in Tel Aviv who supports Yesh Atid, told Al Jazeera. “I don’t know what Lapid’s position will be on settlements.”

Unsettled issues

Some observers consider Israeli settlements built on land occupied after the 1967 war as the biggest obstacle for a long-term peace deal with the Palestinians.

Netanyahu says he believes in a two-state solution for the conflict. He has, however, continued building settlements on occupied Palestinian land in the West Bank, leading critics to contend that he is not serious about peace.

Many on Israel’s right, and some on the left, seem to favour maintaining the status quo vis-a-vi the Palestinians.

“The peace process itself was not very dominant in this election,” Neta Oren, a specialist on Israeli politics and visiting professor at George Mason University, told Al Jazeera. The new government is unlikely “to change anything” on that front, she said.

On the domestic front, Israel is facing a budget deficit of about 40bn shekels ($10.5bn). Unable to pass a budget in October, Netanyahu decided to dissolve the government and call an election.

If Netanyahu stays on as prime minister, a likely scenario, Lapid could become foreign affairs minister or finance minister, Reider said.

Israel’s budget deficit rose to 4.2 percent of gross domestic product in 2012, double the original estimate.

Responsibility for the budget could be a poison chalice for the telegenic newcomer, Reider said, as the population won’t be happy with austerity plans.

Representing Israel’s brand

As a possible foreign minister, Lapid would be responsible for representing Israel’s brand to the outside world. The country’s image has taken a beating recently, with allies such as the US and UK complaining about continued settlement expansion and general intransience.

William Hague, Britain’s foreign minister, warned Israel on Tuesday it was losing international support, saying prospects for a two-state solution to the Israeli-Palestinian conflict were almost dead because of expanding Jewish settlements.

Lacking political baggage and carrying himself with a smooth demeanour, Lapid might be the right person to explain Israel’s often-controversial positions at bodies like the UN.

“If you compare him [Lapid] to [former foreign minister Avigdor] Liberman or Bennett, yes, he will do well for Israel’s [international] reputation,” Oren said.

Official results will be announced on January 30 and the new government is likely to take office sometime in mid-February.