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Fischer: Israeli economy ‘not bad’ but ‘there are things to fix’

Outgoing Bank of Israel governor urges Lapid not to forget about the poor

Outgoing Bank of Israel Governor Stanley Fischer presents the 2012 annual economic report to new Finance Minister Yair Lapid, on April 2, 2013. (photo credit: Anat Hamami/Finance Ministry)
Outgoing Bank of Israel Governor Stanley Fischer presents the 2012 annual economic report to new Finance Minister Yair Lapid, on April 2, 2013. (photo credit: Anat Hamami/Finance Ministry)

Describing the state of Israel’s economy as “not bad,” bank chief Stanley Fischer said that the country’s financial growth outpaced that of nearly every developed country yet still needed work. His statement came in an annual report presented to Prime Minister Benjamin Netanyahu’s new government Tuesday.

The report is Fischer’s last as Bank of Israel governor, and included warnings that the country could suffer if the state’s budget deficit is not reined in.

“The report describes the not bad situation of the Israeli economy,” Fischer said. “There are things to fix but we still grew faster than almost all OECD countries.”

“Growth is relatively good [at 3.1 percent], inflation is low [1.6 percent], unemployment is at its lowest rate for 30 years but there is a problem in the budget which must be dealt with before it becomes greater,” Fischer said. “I am pleased to see that the new finance minister is taking the deficit into account and understands the depths of the problem.”

Israel’s budget deficit in 2012 reached 4.2 percent, more than double what the state originally projected. Officials have said new taxes and severe cuts in public expenditures will have to be made in the new budget to bring the deficit under control.

New Finance Minister Yair Lapid, who has backed cuts, has come under some criticism over the last several days for saying on Sunday he would focus on the financial plight of the middle class.

Presenting the report, Fischer added his voice to a number of politicians and officials saying Lapid should concentrate on trying to balance the budget or help the poor instead.

“There is much talk today about the middle class but it is no less important to talk about the poor in society and how they too can enjoy the growth in the economy,” Fischer said.

A former chief economist at the World Bank, Fischer is largely credited with helping steer Israel’s robust economy clear of the financial crises that the US and Europe have faced in recent years

Accepting the report, Netanyahu said he would not let the country become the next Cyprus or Greece.

“We see what is happening in Europe and this will not happen here, because we responsibly managed the Israeli economy over the last four years,” he said. “Thanks to this, the Israeli economy is coping with the global economic crisis better than most Western economies, and thus we will continue to manage it.”

In addition to an analysis of Israel’s economy in 2012, Fischer’s report identified five main challenges facing the economy in the near future: keeping government expenditure in check; integrating Arabs and ultra-Orthodox into the labor market; increasing labor productivity, which is low compared to other industrialized economies; reducing the cost of living; and managing Israel’s newly active natural gas resources.

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