The Bank of Israel (BOI) on Monday presented Israeli government ministers with its strategic program the bank says will accelerate economic growth in Israel. Bank of Israel Governor Prof. Amir Yaron handed the recommendations to Prime Minister Benjamin Netanyahu, the Minister of Finance, the Minister of Economy and Industry, and a series of other ministers.
The new program comes at a time when Israel’s economy and its currency are under threat from a loss of international confidence due to Prime Minister Benjamin Netanyahu’s governments proposed controversial judicial reform plan. Even Goldman Sachs has predicted that the Shekel could crash should the reforms go through.
The BOI’s program includes six topics that the bank said are necessary for advancing Israel’s economy: the development of human capital, transport infrastructure, the housing market, energy and climate, digital infrastructure, and the Bank’s recommendations for dealing with the cost of living.
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Prof. Amir Yaron pointed out that the program was presented as Israel has come out of the Covid crisis economic recession. He said that, from many standpoints, “the Israeli economy has in the past year closed the macroeconomic gaps that were created during the COVID-19 period” and that economic growth “has returned to its long-term path, and employment has returned to its precrisis rates.”
Yaron said the high inflation found all over the world today, along with the war in Ukraine, “have brought into sharper focus the importance of responsible economic policy, which sees the needs of the time while also looking forward. The design and implementation of such a policy are based on a long-term commitment to deal with challenges to the economy as a result of demographic, technological, social, and environmental developments.”
“In contrast with the Israeli economy’s impressive recovery from the COVID-19 crisis, “added Yaron, “it is inferior in several infrastructural areas, as a result of which the standard of living in Israel is lower than in other OECD countries.”
In 2019, the Bank of Israel published a special report that pointed at the low labor productivity in Israel as a main cause of the gap in the standard of living between Israel and other advanced economies, and recommended ways to increase labor productivity.
“Since then,” said Prof. Yaron, “the strategic issues with which the Israeli economy needs to deal have remained in place. This is because these issues must be dealt with in the long term, and a consistent multi-year path is necessary in order to implement the program.
Yaron also declared that removing barriers to the development of the financial system and diversifying the existing credit products should “ensure a more efficient allocation of financing sources in the economy, optimize the division of risks among credit suppliers, and thereby contribute to sustainable growth.”
The program covers the main areas that we believe should be advanced with a strategic economic vision.
“I am certain that the new government will do all that is in its power to advance these important issues, with a forward-looking economic vision,” concluded Yaron. “The Bank of Israel is committed to advising the government in the formulation of programs in the directions detailed in this program.”