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After picking up to 4% in 2016, growth is projected to be around 3¼ per cent in 2017-18. Inflation is projected to firm up gradually. The maintenance of expansionary monetary and fiscal policies and projected wage increases will continue to shore up domestic demand.
As inflation increases, the central bank is projected to gradually withdraw monetary stimulus. Despite having abated somewhat, ongoing tensions in the property market continue to require the authorities' attention to preserve a robust banking sector. With the economy at full employment, the budgetary expansion projected in 2017 could increase labour market tensions and slow the decline in government debt. Measures taken or announced in welfare, housing and transport should promote more inclusive growth.
Continued product market reforms are needed to stimulate productivity and pay in the sheltered sector where many of the lowest-skilled workers are employed. Increased external competition, especially in the agricultural and food sectors, would reduce the cost of living. Less restrictive import procedures, with lower non-tariff barriers, would deepen integration into global value chains, which is relatively limited. To ensure a better sharing of the benefits of this integration, a more effective education system, facilitating the integration of disadvantaged groups, would be desirable.
Economic Survey of Israel (survey page)