OECD Secretary-General Angel Gurría congratulated Israel for its superior
economic growth but noted inequality and a lack of social
“Given the state of affairs in the world, Israel is looking
steady, strong and I think moving in the right direction,” Gurría said Sunday,
as he presented the Organization for Economic Cooperation and Development’s 2013
Economic Survey on Israel to the government.
With GDP growth rates
projected near 3.7 percent for 2013 and only a slight decline expected in 2014,
Israel was growing faster than the world average of 2.7% and at about three
times the rate of the OECD average of 1.2%.
New Finance Ministry figures
released on Sunday, however, put growth somewhat lower, estimating it at 3.6%
for 2013 and projected it to be 3.1% for 2014.
Many OECD countries are
“still exhibiting and suffering the effects of the crisis. Unemployment is still
growing in the Euro zone, at around 12%.”
In Israel it has dropped below
Gurría picked out Israel’s booming hi-tech sector and its natural gas
finds as major drivers of the economy, noting that the latter accounted for one
percentage point of its economic growth.
The natural gas, in other words,
could account for the entire difference between Israel’s GDP growth and the
Yet not everyone was able to partake in Israel’s positive
economic progress. The report cited the high levels of poverty, with more than
20% of the population living under the poverty line.
“I think the
question is how to broadly translate these good results, these good numbers,
into a broadbased improvement in living standards across the population,” he
According the OECD report, “the middle-class concerns that surfaced
in the 2011 ‘tent protests’ remain prominent, notably the housing costs, high
retail prices and associated dissatisfaction with the degree of competition in
the economy, the role of large familyrun business groups and the distribution of
the tax burden.”
To stay ahead, Israel would have to implement structural
reforms, make the labor market more flexible, reduce bureaucracy and ensure that
ballooning real estate prices were not a housing bubble.
that Israel do away with the VAT exemption in Eilat and on fruits and
vegetables, and raise the retirement age for women, which is currently at
Prime Minister Binyamin Netanyahu, who met with Gurria in the
morning, welcomed the report but acknowledged the challenges it
“On closing the gaps, I would say that there will be more
people who will participate and benefit from growth. This is the main thing I
would say that we need to do, but we must ensure that there will be benefits,”
he said. “Creating growth is the critical thing that we are committed
Finance Minister Yair Lapid noted that as an export-oriented
economy, Israel was vulnerable to world events.
In a speech to the Globes
Israel Business conference, Lapid spoke of the importance of moving the peace
process forward in that context.
“The latest OECD report, presented just
this morning to the government, cites Israel’s hi-tech industry as the main
engine of our economic growth, but our enemies also know that this makes our
economy particularly vulnerable in the face of all kinds of international
boycotts and sanctions,” he said.
Turning to fiscal issues, Gurría noted
that Israel has increased public expenditure less than most OECD countries, but
noted that the condition a few years down the road remained a
The Bank of Israel on Sunday said that the newly approved
cancellation of a NIS 3.3 billion income tax increase, which had been planned
for January, would require the government to raise other taxes or cut spending
to the tune of 1% of GDP in 2015, and over 2% cumulatively by 2017.
Finance Ministry projections put the 2013 deficit at 3%, well below the 4.3%