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| 26.01.2010 |
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| Main points of an address by Professor Zvi Eckstein, Deputy Governor of the Bank of Israel, at the Israel Management Center Annual Managers' Conference:"Israel dealt with the crisis better than did most advanced economies" |
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| "Israel dealt with the crisis better than did most advanced economies; this was thanks to several features of Israel's economy prior to and during the crisis." So said Professor Zvi Eckstein, Deputy Governor of the Bank of Israel, today in his address to the Annual Managers' Conference of the Israel Management Center. |
| Professor Eckstein then described those features: |
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A flexible monetary policy with a target inflation range of 1–3 percent a year, with a readiness to intervene in the financial markets when they do not function in accord with the basic economic conditions. |
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A responsible, conservative bank supervision policy that focuses on risks in the loans and money markets. |
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A balanced fiscal policy combined with a low and declining debt/GDP ratio (77 percent)––a policy based on the automatic stabilizers, i.e., increasing the deficit by reducing taxation and not by providing incentives that expand the basis of public expenditure. |
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A significant surplus in the current account of the balance of payments, high-tech-intensive exports, and the attractiveness of Israel's economy to foreign and domestic investors. |
| "The main weaknesses of the economy which we will have to confront after the crisis," added the Deputy Governor, "are the low productivity of the non-exporting industries—the service and financial industries and the public sector––and the great inequality in households' income." Inequality is expressed in a high poverty rate resulting from low levels of employment, low pay in unskilled jobs, and a limited system of welfare services for the weaker sections of the population. |
| Professor Eckstein went on to speak of the objectives of fiscal policy, and stressed that investment in health services, infrastructures, welfare services, and employment support services in Israel as a share of GDP is among the lowest in the advanced economies. "Excluding public expenditure on interest and defense," he added, "public expenditure in Israel is low compared with that in other countries." To ensure sustained growth we must face up to the challenges of the education system, maintain a downward-sloping course of the debt/GDP ratio, reconsider the path of tax reductions, and keep the expenditure/GDP ratio in the 2011 budget at the current level. |
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