Israel's economy is strong and the government is exercising responsible fiscal, monetary and financial policies, resulting in a high quality of life, an Organization for Economic Cooperation and Development official said Sunday. A recent report by the organization of the world's most developed nations, titled "Economic Survey of Israel 2016," noted that despite these positive indicators, Israel suffers from income inequality, sluggish investment in social budgets, considerable socio-economic gaps, and inflated housing prices. OECD Secretary General Angel Gurria presented the report to the government Sunday, ahead of a press briefing held in Jerusalem. The report praised the actions taken by Prime Minister Benjamin Netanyahu, Finance Minister Moshe Kahlon and Bank of Israel Governor Dr. Karnit Flug. "Besides sound economic fundamentals, Israel has a vibrant high-tech sector and world-class universities, making it a prime destination for inward investment. Meanwhile, the exploitation of its natural gas reserves make for a bright future if carefully managed. But, while these advantages have allowed Israel to close the gap in average living standards with the most advanced OECD economies, a number of challenges lie ahead to ensure growth is sustainable and inclusive." Listing issues that must be addressed, the report said that among the OECD's 34 member states, Israel's poverty rate is second only to Mexico's; housing prices are grossly inflated, not only compared to OECD members, but also compared to the U.S. and the euro zone in general; the food sector lacks competition and is generally overpriced; and the banking sector is overly concentrated and is ineffective. The OECD also recommends an extensive reform of the Israel Electric Corporation, which effectively operates as a public monopoly, and turning it into a holding company. Gurria further recommended raising taxes, revoking various tax exemptions, imposing value added tax on produce, and annulling the comprehensive VAT exemption afforded to the southern resort city of Eilat. Despite the challenges, the OECD found that 80% of Israelis were happy with their quality of life, compared to an average of 68.8% among other OECD members. Israel is among the OECD's top three countries in terms of life expectancy, with an average of 82.1 years, compared to the OECD average of 79. Israel is topped only by Switzerland, with an average life expectancy of 82.9, and Japan, with 83.4. According to Gurria, "As we look back on Israel's five years as an OECD member, and as we reflect on how much the country has developed since the turn of the century, I am also confident that we can look to the future with a sense of confidence. I have no doubt that Israel's most pressing social, economic and environmental policy challenges can be overcome. The OECD looks forward to continued close collaboration with Israel in the pursuit of our shared goal of better policies for better lives." Commenting on the report, Netanyahu said, "This report commends Israel's economic strength, high growth rate, low unemployment, and fiscal responsibility, all of which we are proud of. However, it also points to large gaps -- between social groups, especially the haredi public and Israeli Arabs -- or to be exact, haredi men and Arab women, who we should integrate into the labor market; the need to increase productivity, and serious issues we have with over-regulation, and of course too much bureaucracy.
Credit: GPO
"With GDP growth averaging nearly 4% since 2003, Israel is consistently one of the strongest performers in the OECD. As conflict in the region persists, and as the global economy struggles to achieve escape velocity from the financial crisis, growth has moderated more recently. But unemployment remains low, prices are stable, the external surplus is comfortable, and the public finances have improved considerably," Gurria said in a statement to the press.
"Unfortunately, the State of Israel also stands out over the serious issues it has, and the government must address these issues."
