Economy

Israel - Economic forecast summary (June 2016)

 

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Growth is projected to remain at 2½ per cent in 2016 before rising to 3% in 2017. An expansionary budget and continuing low interest rates and oil prices should support domestic demand and employment. Exports have been very weak of late but should pick up with a gradual strengthening of foreign demand, albeit damped by the shekel's appreciation.


Given very low inflation and highly expansionary global monetary policies, continuing the current accommodative domestic monetary policy is desirable to prevent currency appreciation. Persisting tension on the property market still needs close monitoring by the authorities. Tax cuts and increased government spending in 2016 will boost the economy in the short term but will also complicate attaining the public debt reduction objective in the medium term.


The catching-up process and social cohesion could be enhanced by stronger productivity in sheltered sectors, which often have a low-skilled workforce. Current efforts to stimulate competition in these sectors, especially agriculture and banking, are most welcome and should be pursued to increase purchasing power. Improvements in public transport and a more effective education system to facilitate the integration of under-privileged groups into the labour market would also increase the efficiency of the economy and public well-being.

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