The International Monetary Fund said Wednesday it expects Israel's GDP growth to remain stable at 3.4 percent in 2014, but noted that social disparities pose a threat to the economy, according to AFP.
"Israel's economic fundamentals remain strong. GDP growth is solid, unemployment is low and inflation remains firmly anchored within the one-three percent target range," the International Monetary Fund said after its latest review of the economy.
"The financial sector is in good health and the external position is strong," the report added.
It forecasted that GDP growth of 3.4 percent over the past two years will be repeated in 2014, with unemployment advancing slightly from 6.4 percent to 6.7 percent in 2013.
But it said that "excluding the impact of a new large-scale natural gas production, growth momentum is expected to remain moderate, as planned fiscal
tightening and a further strengthening of the currency will weigh on the economy and offset, in part, the pick-up in demand in Israel's major trading partners."
The report highlighted three possible threats to the economy. It first noted that public debt remains high despite a noticeable decrease over the past several years. It also said that "rapid house price inflation, if it persists, poses risks to financial stability." And it noted "large employment and productivity gaps between the general Jewish population, the ultra-Orthodox (hareidi) Jewish and Israeli-Arab communities."
If those are sustained, they "could undermine the economy's long-run growth potential," according to the report.
A similar report by the Organization for Economic Cooperation and Development in August noted that unemployment remained high among the hareidi and Israeli Arab communities, a huge factor in statistical studies on Israel's poverty rates.
"The incomes of about one in five Israeli households fall below the (relative) poverty line," the report said. "Among Arabs and in the rapidly growing ultra-Orthodox (hareidi) Jewish community poverty is over one in two, mainly due to low employment rates among Arab women and ultra-Orthodox men."
It said that while Israel met or exceeded the OECD average by several measures, it was below average in "social connections, housing, education and skills, work-life balance, personal security, environmental quality and civic engagement."
The latest report recommended boosting educational levels - singling out the underperforming Israeli Arab and hareidi Jewish communities for attention - and overhauling welfare systems.