According to the Bank of Israel report economic growth would reach just 4.1%, while business sector product would rise in 2008 by 5%
The Bank of Israel (BoI) published last week its forecast for Israel's economic growth in 2008. The writers of the report noted that economic growth would reach just 4.1%, while business sector product would rise in 2008 by 5%.
The BoI believes that economic growth next year will slow down, compared with the rates of more than 5% in the last four years. Economic growth is likely to reach 5.1% in 2007, after reaching 5.1% in 2006 and 5.3% in 2005.
The BoI forecast was a more guarded assessment than that issued by the Ministry of Finance, which predicted that growth in 2008 will reach 4.3%.
The BoI also expects unemployment to fall by 0.1% to 7.4%. Unemployment has now fallen by 3.2% since 2003. The BoI bases its forecast on some major factors, including: The weakness in cyclical growth factors. The strengthening of supply-side constraints, expressed in a simultaneous rise in wages and labor productivity. A slowdown in the rate of increase in the number of people employed. A small reduction in the current account surplus in the balance of payments.
The BoI also stressed that the general government deficit is expected to fall slightly relative to 2007, reaching 1.8% of GDP.
The public debt to GDP ratio will fall to 83.2%, a fall of 1.6 points on the previous year, assuming no further privatizations in 2008.
The Ministry of Finance announced last week that Israel's GDP will reach $150 billion, or NIS 642.2 billion, in 2007.
The Ministry of Finance forecasts 4.2% growth in 2008, with GDP reaching NIS 669.3 billion in fixed prices. According to Finance Ministry projections, the debt to GDP ratio could reach 60%, the ceiling set under the provisions of the EU Maastricht Treaty.
A ministry spokesman noted that the Second Lebanon War was the first time in Israel's history that economic growth following a war continued at the same pace as before the war.