The OECD has basically joined the chorus of financial organizations, like Standard and Poor’s and Fitch in predicting that Israel will continue to see economic growth, albeit at a much lower rate than in recent years. It also warned that domestic political issues, specifically the judicial reforms proposed by the government of Prime Minister Benjamin Netanyahu, could cause harm to the country’s economy. This was also cited as a caveat when Fitch and Standard and Poor’s both reaffirmed their high credit ratings for Israel.
Reading the report’s opening also sounds like the OECD just copied what has already been said many times over since the start of 2023.
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For example, the OECD stated, “The Israeli economy has rebounded strongly from the COVID-19 pandemic and has proven resilient to the repercussions of Russia’s war of aggression against Ukraine. Inflation has risen above the central bank’s target range amid strong demand and a tight labor market.”
But it also said that demographic challenges, related to the rising share of population groups with weak labor market attachment and ageing, will put pressure on future growth and fiscal sustainability.
“Addressing these challenges,” said the OECD, “and reducing large labor market disparities will require setting appropriate work incentives and providing better support for working parents; improving skills at all stages of the learning cycle; as well as increasing mobility and reallocation towards high productivity jobs and firms, in particular in the high-tech sector.”
The OECD also said that to maintain good health outcomes, Israel must deal with emerging doctor shortages and the country’s interaction between its public and private health care sectors must be reformed.
“Reducing digital gaps across households and firms, by improving digital infrastructure, upgrading skills, raising competition and reducing financing constraints, can boost productivity growth and narrow the productivity divide between the high-tech sector and the rest of the economy. Fully harnessing Israel’s solar energy potential can help accelerate the green transition.”
The OECD also said that Israel’s GDP is now $49,189, its rate of taxation on personal income is 7.2% of GDP and its government debt is 83% of GDP.
