The International Monetary Fund said Wednesday it expects Israel’s GDP growth to remain stable at 3.4 percent in 2014, but noted that social disparities pose a threat to the economy.
“Israel’s economic fundamentals remain strong. GDP growth is solid, unemployment is low and inflation remains firmly anchored within the one-three percent target range,” the International Monetary Fund said after its latest review of the economy.
“The financial sector is in good health and the external position is strong,” the report added.
It forecast that GDP growth of 3.4 percent over the past two years will be repeated in 2014, with unemployment advancing slightly from 6.4 percent to 6.7 percent in 2013.
But it said that “excluding the impact of a new large-scale natural gas production, growth momentum is expected to remain moderate, as planned fiscal tightening and a further strengthening of the currency will weigh on the economy and offset, in part, the pick-up in demand in Israel’s major trading partners.”
It highlighted three possible threats to the economy.
It first noted that public debt remains high despite a noticeable decrease over the past several years.
It also said that “rapid house price inflation, if it persists, poses risks to financial stability.”
And it noted “large employment and productivity gaps between the general Jewish population, the ultra-Orthodox Jewish and Israeli-Arab communities.”
If those are sustained, they “could undermine the economy’s long-run growth potential.”
A large part of the Orthodox community, which represents around eight percent of the population, does not work, focusing instead on religious studies. Arabs, another 20 percent, suffer discrimination in education, employment, housing and public finance.
The report did not mention a growing international movement to boycott products produced in settlements in the occupied West Bank. That movement is particularly strong in the European Union, which accounts for one-third of Israeli exports.
Finance Minister Yair Lapid recently said that “even a 20 percent fall in our trade with Europe would mean 9,800 workers being fired immediately.
“Even a partial European boycott would be felt by every Israeli, and the cost of living would go up.”