The Ministry of Finance today predicted that the economy will grow by 5% this year, after 5.1% growth in 2006. Business product is projected to grow by 5.6%, after 6.4% growth last year.
The ministry said the global economic environment and domestic demand made this growth projection achievable. It added that the rise in real wages, the increase in employment, fall in the unemployment rate, and the fairly low real interest rate supported further growth in domestic demand.
The ministry warned, however, “The projected growth rate for 2007, while similar to the growth rate in 2006, is less than the potential growth rate, because of a slowdown in global markets and the appreciation of the shekel.”
The ministry said that the Second Lebanon War cost 0.7% of GDP in annual terms, amounting to NIS 4 billion.
The ministry said that growth in 2007 depended on, among other things, the global growth rate, a responsible fiscal policy, and how restrictive monetary policy will be. The ministry assumes there will be no major deterioration in the security situation this year.
The ministry assumes that inflation will be less than the 1-3% target in 2007, and that there will be deflation in the coming months. The unemployment rate is projected to fall to a monthly average of 7.4% of the civilian labor force during the fourth quarter, investment in fixed assets will rise by 5.5%, exports will grow by 5.1%, industrial exports, excluding diamonds, will grow by 7.4%, imports will grow by 4.9%, private consumption will grow by 4.9%, public consumption will rise by 2.9%, real wages will rise 2.8%, the number of employed Israelis will increase by 3.3%, and participation in the labor force will rise from 55.6% to 55.8%. Finally, the ministry projects that public debt will fall to 84% of GDP in 2007 from 86% in 2006.
Published by Globes [online], Israel business news - www.globes.co.il - on April 30, 2007
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