2009 OECD Economic Surveys: Israel 2009

image of OECD Economic Surveys: Israel 2009

This first OECD review of Israel's economy includes chapters covering recent economic developments and policy challenges, the macroeconomic policy framework, education reform, reducing poverty and raising employment rates, and policies affecting the business environment.

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Economic developments and policy challenges

Israel’s economy has admirable strengths but also some serious weaknesses. Rapid expansion of hi-tech activities over the past two decades has contributed significantly to an impressive rate of GDP growth; an environment of low inflation is firmly established; and the economy has weathered the recent global recession relatively well. However, the economy is particularly vulnerable to shocks, and per capita growth has been less remarkable. Furthermore, public debt remains uncomfortably high. Also, high rates of poverty and weak labour-market attachment among the rapidly growing Arab-Israeli and Ultra-orthodox Jewish communities as well as wider weaknesses in the country’s human capital hinder growth. Though tertiary educational attainment statistics are impressive, PISA results show core skills among secondary school students to be weak. This is undermining the environment for business, which is also hampered by regulation, according to preliminary analysis of the OECD’s product-market indicators.

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