Israel’s economic forecast: Slowdown, high poverty

Zionist daily Yedioth Aharonoth says Israel should expect slow economic growth in the coming years.

The daily cited a report released Wednesday by the Taub Center for Social Policy Studies in Israel, titled “State of the Nation 2016.”

According to the study, for years Israel’s GDP per capita grew by 2% to 2.5% per year; however, from 2012 to 2016 it slowed to an average annual growth rate of about 0.9%.

Researcher Gilad Brand examined the sources of the slowdown and found that “the most important ingredient in economic growth over the past decade was an increase in the volume of employment,” which contributed about half of the growth between 2012 and 2015.

At the same time, he found a decline in the contribution of human capital to Israel’s economic growth and a slowdown in investment in physical capital per worker.

He also found that productivity has declined as well – a trend that has continued since 2012.

The data showed that a large portion of new employees entering the economy have education and skills that are not relevant to the current labor market, which inhibits growth.

In the future, it is expected that those with education that does not meet the needs of the labor market will make up an even greater portion of the population – which in turn will decrease the quality of the workforce and reduce the potential for long-term growth, he concluded.

Furthermore, Bland found that the expansion in the labor market has reached a standstill, as the share of Israelis in the working-age population (25 to 64) is on the decline – a trend that is likely to intensify.

This process slows employment growth and is expected to detract 0.6% annually from potential growth through the end of the decade.

With regard to poverty and inequality, researcher John Gal stated that the issues of welfare and social security were not central priorities of the government these past two years, despite high poverty and inequality rates.