READ full country note (PDF)
Growth is projected to strengthen to over 3½ per cent in 2018 and 2019. Support from fiscal easing, very low interest rates and a stronger external environment will boost demand and employment. In a tight labour market, rising wage pressures are projected to lead to a steady increase in inflation.
The monetary authorities must stand ready to gradually raise interest rates once inflation is sustainably back in the 1-3% targeted range. Higher social spending and expenditure on education and health care are welcome to foster more inclusive growth. The financing of these expenses with sufficient revenues would preserve budgetary room for manoeuvre and lower the risk of overheating. Reducing the existing large social disparities will be beneficial for growth, but will also requires intensifying structural reforms that improve the skills and productivity of disadvantaged groups.
Economic Survey of Israel (survey page)