Don't expect Israel's growth rate to bounce back up to the levels seen last decade. A Finance Ministry study released Sunday concluded that Israel's moderate economic growth rate is here to stay, at least through the medium term.
The study, released as part of a weekly economic update from the Finance Ministry, tackled why Israel's annual GDP growth has fallen from an average of 4.3% between 1991 and 2011 to roughly 3% since 2012.
The main drivers of the lower growth, according to the study, were lower labor inputs and a decline in R&D investment. Israel is near the bottom of OECD rankings on its labor productivity, which the Bank of Israel attributes in part to low levels of investment. Demographic changes have also affected the labor supply. Israel's Arabs and ultra-Orthodox Jews, who now account for nearly a third of the population, participate in the labor force in much lower rates than secular Jews, and on average have lower levels of education and skills.