'US slowdown a major risk to local economy'

Included on the agenda of the government's socio-economic policy in 2008 are increasing the employment rate.

Expectations of a significant slowdown in the US economy represent a major threat for Israel's growth prospects, requiring the government to make structural changes, including tax reductions, Finance Minister Ronnie Bar-On said Sunday. "Signs of a slowdown in parts of the the global economies requires Israel to continue to adopt a responsible economic and fiscal policy in 2008 by introducing additional structural changes in the economy," he said in a meeting with journalists in Jerusalem. "The main risk to growth is a more significant slowdown in the US economy. The subprime mortgage crisis, which negatively affects liquidity in the markets, is likely to damage global economic growth and as a result of Israel's dependence on exports, also our economy." As the year draws to a close, the Finance Ministry expects the economy to have accelerated by 5.4 percent in 2007, while over the next year it is forecasting moderate 4.2% growth. Given the global situation, Bar-On said the government's economic policy needed to focus on four pillars: keeping a responsible budget policy and creating conditions of certainty in the business sector; reducing the debt to GDP ratio; cutting taxes on companies and individuals; making structural changes to remove obstacles of growth. "Foreign investors will not necessarily come here if we don't reduce taxes or keep reducing government expenditure and the debt burden," he said, adding that the Finance Ministry has set up a macro team including representatives of the Bank of Israel and MK Avishai Braverman, to work on an economic plan. Included on the agenda of the government's socio-economic policy in 2008 are increasing the employment rate. "In 2008, we are seeking to narrow the number of foreign workers, support and develop the traditional industry in particular in the periphery, promote technology education, implement the negative income tax law and bring more haredi women into the work force," said Bar-On. On a positive note for the coming year, Bar-On said meetings with credit rating agencies Fitch and Moody's scheduled for the beginning of 2008, were expected to be promising following the supportive report by the International Monetary Fund and the move by credit rating agency Standard & Poor's to raise the country's risk rating last month.