With a booming economy and rising debt, Israel’s unemployment rate hit an all-time high in March and unemployment for the third consecutive month hit a new high.
The economy is expected to grow by 0.2 per cent in 2019, according to the OECD, with the economy growing by an annual rate of 2.4 per cent.
However, this is still below the OECD average of 4.7 per cent and it comes amid an overall tightening of monetary policy and an easing of restrictions on foreign travel.
“In the next few months we’ll probably see some growth in the labour market,” said Yair Gal, a former Israeli economy minister who is now a partner at Herzliya law firm.
“But we still have a long way to go before we’ll see a clear recovery.”
While the economy has continued to grow, its rate of job creation has slowed significantly over the past three years, to a paltry 2.7pc in the first quarter of 2019 from 5.1pc a year earlier.
While the Israeli government has been trying to boost the economy by encouraging foreign investment and boosting productivity, the latest data suggest the labour force participation rate (the share of employed people over the age of 25) is already at an all time low, and is likely to continue to decline.
According to the latest statistics from the Organisation for Economic Co-operation and Development (OECD), unemployment in Israel stood at 15.6pc in March, with 1.5 million jobless people, the vast majority of them young people, out of work.
“The Israeli economy is going through a rough patch,” said Daniel Cohen, director of research at the Israel Policy Institute, a Washington-based think tank.
“There’s no doubt that the economic recovery is slow.
Unemployment is still higher than the OECD level and unemployment is not growing, and that’s not good for Israel’s prospects.”
Cohen said it was important to understand the factors behind the low unemployment rate.
“We can’t talk about a perfect recovery.
But we can say that we’ve come up with some solutions, some policies that will stimulate the economy and boost the labour supply, and those will help lift the economy,” he said.”
That’s going to be good for the economy.
But I don’t think we’re seeing a full recovery yet.”
Some Israelis are concerned about the state of their finances.
According, to the most recent statistics from Israel’s Finance Ministry, total government debt has grown from $11.2bn in 2009 to $15.4bn in 2019.
The government also has a net debt burden of $7.4 billion, of which the average is $1.7bn, a trend that has continued for the past six years.
“Net debt is a big problem for us.
Our foreign debt has increased by almost a third in five years,” said Haim Herzl, an economist at the Levy Economics consultancy.”
Our deficit is a problem because it’s a big challenge to maintain our social spending and reduce the debt burden.
But also, we’re not seeing a real recovery in the private sector.”
The Israeli government says it has made a number of reforms in recent years, including a reduction in corporate tax rates and increased investment in infrastructure.
However critics argue the reforms have not worked, particularly in terms of creating jobs and boosting employment.
“I don’t see any progress in terms on creating jobs,” said Avigdor Ben-Menashe, a researcher at the Hebrew University.
“If you want to create jobs, you have to invest, you can’t just take the money that is already there.”
The OECD expects the unemployment rate to increase to 8.5pc in 2019 from 8.2pc in 2018.
According the OECD’s projections, Israel will be the third largest economy in the world by 2020 and the fourth largest in 2020.
The Israeli Government has announced a range of measures to boost growth in 2019 including a $10 billion tax cut, a $500m loan to start construction of a new rail line, and the creation of 500,000 new private sector jobs.
But the latest figures from the OECD suggest the economy is still struggling to recover from the last recession.
“It’s not enough to build the infrastructure and the infrastructure is just not there.
We need more investment in our labour market to boost employment,” said Cohen.”
So we need more spending.
And the government needs to put more money into the economy, to encourage more investment.”