Bank of Israel Governor Stanley Fischer presented the central bank’s annual report to the government Wednesday, and summarized 2011 as a year in which the economy dealt successfully with significant difficulties.

In the short term there will be a need to deal with budgetary pressures stemming largely from defense needs, Fischer said. He added that the main long-term challenges to economic growth are related to demographic trends and problems in the education system.

The eight-chapter, 321-page report covers economic policy, industries, monetary and inflationary policy, the financial system, labor force, public services, balance of payments, and welfare.

In reference to the summer's social protest, Fischer said that a range of important issues were subsequently placed on the agenda with regard to the cost of living including food prices, housing costs, childcare and education.

Fischer said that in 2011 the economy grew by 4.7 percent, which was similar to its growth rate in 2010. This growth was expressed in the continued decline of unemployment, which reaches it lowest level in over three decades, he stated.

Prime Minister Binyamin Netanyahu said the 4.7 percent growth was impressive considering the global economic crisis.

Speaking after being officially presented the report by Fischer, Netanyahu noted that Israel's economy grew almost 2.5 times the OECD average and that unemployment in the country dropped to its lowest levels in nearly 30 years.

"As I do every year, I promise to closely study this report, the prime minister said. "However, from a first glance, I agree with the assumption that the results of implementing the free education law will be felt and will improve the situation for families in which both parents work and especially those in which the mothers work.  I am encouraged by the increase in the employment rate among ultra-orthodox men even if there is still a long way to go on this issue."

Netanyahu said he was especially pleased by an item in the report that said dimensions of inequality have registered a modest decline. "These are major challenges that my government is faced with."

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