A biannual economic survey published today by the International Monetary Fund (IMF) forecasts 4.2% real growth in Israel in 2005, and 3.9% in 2006. The IMF expressed concern at Israel’s public debt, and called on the Ministry of Finance to reinforce the credibility of its fiscal policy.
The IMF is less optimistic about Israel’s economic growth than Governor of the Bank of Israel Prof. Stanley Fischer. In a speech to the annual general assembly of the Federation of Israeli Chambers of Commerce in Tel Aviv yesterday, Fischer said that the Israel economy would grow by 4.5% in 2005 and 4% in 2006.
The IMF’s growth forecast for Israel this year is nevertheless one of the highest in the IMF’s group of 29 advanced economies, which includes Israel. The IMF forecasts higher growth only for Hong Kong 6.3%, Iceland 5.8%, and Ireland 5%. The IMP forecasts higher growth in Israel than in the US 3.5%, the euro bloc 1.2%, and Singapore 3.9%.
The IMF also forecasts higher growth in 2006 in Israel than in the US 3.3% and the euro bloc 2.7%. Only in South Korea 5%, Iceland and Ireland 4.9%, Hong Kong and Singapore 4.5%, Taiwan 4.3%, and Cyprus 4% does the IMF forecast higher growth than in Israel in 2006.
The IMF’s growth forecast for Israel is the lowest in the Middle East. Oil exporters have the highest growth forecasts, for example Iran (5.7% in 2005 and 5.4% in 2006), Saudi Arabia (6% and 4.7%). Even Jordan (5%) and Egypt (4.8%) have higher growth forecasts than Israel for 2005.
The IMF predicts that the Consumer Price Index in Israel will rise by 1.2% in 2005 and 2.3% in 2006.
The IMF report cites the falling trend in unemployment in Israel. The IMF predicts that Israeli unemployment will average 9.1% in 2005 and 8.7% in 2006, higher than unemployment rates in the IMF’s group of 29 advanced economies.
In a brief analysis of the Israeli economy, the IMF says that growth in Israel remained steady in the first half of 2005, following recovery in 2004. Growth this year, which the IMF predicts will reach 4.2%, rests on a solid foundation of high-tech exports and private consumption.
The IMF is concerned about the burden of public debt in Israel, however. “Taking into account weak points and the high level of public debt over 100% of GDP it is essential to strictly observe the 3% of GDP deficit target in the medium term,” the IMF stated.
The IMF added that Israel should reinforce the credibility of its current fiscal framework by means of a medium-term spending plan.
Published by Globes [online] - www.globes.co.il - on September 21, 2005