Finance Ministry has optimistic forecast
Unemployment expected to fall to 6%, wage gaps to diminish, while poverty declines, exports increase
Good news for the Israeli economy. Evaluations based on initial data from various sectors of the economy suggest unemployment rates will decrease to 6%, reduced from the 7% forecast at the beginning of the year. Poverty rates are also expected to decline significantly for the first time in years.
From data recently presented to senior officials at the Finance Ministry, including Minister Yuval Steinitz, a rosy picture emerges of continued recovery in the Israeli economy.
Unemployment, which began this year at 7% and fell unexpectedly to 6.5% in June, is expected to continue to fall to 6% by September. This is mainly due to thousands of new jobs and a reduction in lay-offs.
Wage gaps are also expected to diminish for the first time in years. Following harsh criticism of the bloated salaries of senior executives and due to the economic crisis, salaries of some top CEOs have been reduced while others have been raised only modestly. In addition, the salaries of blue-collar workers have gone up.
In many cases the salaries of executives were reduced while those of workers remained unchanged, so that for the first time in 20 years wage gaps in Israel were being reduced.
The Finance Ministry estimates that the number and percentage of those defined as living in poverty has diminished considerably for the first time since the 1990s.
"It may be that the number of poor people in Israel, in the next poverty report, will be 10-20,000 less than in the previous report," a senior Finance Ministry source said.
Exports flourishing
The outlook for exports was also bright, against all expectations, based on export growth in Q2.
Forecasts in this area were pessimistic for three main reasons: The economic crisis which has gripped the globe for the last two years and led to a reduction in world trade, the debt crisis suffered by some states in Europe (an important export destination for Israel), which was expected to undermine exports from Israel, and the devaluation of the dollar and euro.
"In contrast to all the groaning of the industrialists and exporters – Israeli exports are flourishing, especially now," a senior Finance Ministry figure said.
Growth is expected to reach 5% by the end of next year, which is Israel's optimal growth rate, according to Finance Ministry officials. According to data from the Central Bureau of Statistics, growth in Israel at present is about 4% (4.1% in the first half of 2010), though in Q2 the Israeli economy reached a growth rate of 4.7%.
Steinitz confirmed that in recent days he had been presented with data "which compliments the Israeli economy, mainly a serious and unexpected decline in unemployment and significant improvements in the rate of poverty."
He added he was unable to give further details and that the public will have to wait for official data.
On Wednesday the Bank of Israel published the combined index measuring the state of the economy, which rose by 0.2% in July. The Bank said this was the continuation of continued increase in market activities. The Bank also corrected the index for June to a rise of 0.5% (instead of 0.1%).
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