"The Economist": 2006 will be boom year in Israel

The Economist Intelligence Unit sees elections being held before the end of 2005.

The Israeli economy will achieve reasonable growth of around 4%, according to the Economist Intelligence Unit.

In its 2005 forecast, published last Friday, the Economist Intelligence Unit predicts that economic recovery will accelerate significantly in 2006, and that the growth trend in Israel’s GDP will strengthen. Private consumption and real wages will rise further, and unemployment will fall.

The pace of investment in Israel will quicken, while the 3% budget deficit target will be met, excluding spending on disengagement. A moderate rise in inflation is expected. Actual inflation will be within the 1-3% official government target range.

The dollar is expected to continue weakening against all other foreign currencies on overseas markets, including the new Israel shekel. The Economist Intelligence Unit believes that a weak dollar is likely to lead to a substantial shekel appreciation against the dollar, coupled with a small balance of payments deficit.

According to the Economist Intelligence Unit, the change in the composition of the coalition will force the new government to slow the process of privatization and structural change, particularly in the electricity and energy economies. On the other hand, other privatization and reforms will continue, especially in banking and the capital market.

The Economist Intelligence Unit still predicts that the new government will have difficulty lasting until the end of 2006, the legal date for Knesset elections. The magazine says that the prime minister will be forced to bring elections forward to 2005.

Published by Globes [online], Israel business news - www.globes.co.il - on January 9, 2005

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