Finance Ministry sees 11% unemployment (in Israel) by year-end

Globes ^ | 29 October 2003 | Zeev Klein

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Finance Ministry sees 11% unemployment by year-end

Unemployment will fall only in 2005. The ministry sharply criticized the Bank of Israel's interest rate policy. Zeev Klein 29 Oct 03 16:08

Unemployment will reach 11% of the civilian labor force by the end of 2003, amounting to 286,000 people, states a macroeconomic forecast published by Ministry of Finance chief economist Dr. Michael Sarel today. The unemployment rate is currently 10.6%, or 265,000 people.

Sarel emphasized that no decline in unemployment was expected in 2004, and unemployment would begin to fall only in 2005. He said a fall in unemployment depended on scrupulously implementing the economic policy measures and persisting with the aggressive policies to reduce the number of foreign workers in Israel.

"If a massive influx of Palestinians workers to replace the foreign workers is approved, or if the number of foreign workers isn’t reduced in accordance with the cabinet decisions, unemployment could soar far above 11%," he warned.

Sarel sharply criticized the Bank of Israel's interest rate policy. He said the Bank of Israel would probably again miss the inflation target this year, and inflation in 2003 would be at least minus 1.5%.

The Ministry of Finance predicts that 2004 will see a turnaround in the economy. GDP will grow by 2.5% and business product by 3.6%. For the first time after three years of recession, the ministry predicts a 0.8% rise in GDP per capita. GDP per capita fell 7% in 2001-03.

The main changes in the Ministry of Finance forecast for 2004 are as follows:

• Private consumption will grow by a modest 1.2%.
• The standard of living will fall by 0.5%.
• Public consumption will shrink by 2.9%.
• Imports will grow by 3.8%.
• Exports excluding diamonds and start-ups will grow by 6.2%. Rising global demand for high-tech products will further contribute to Israeli exports.
• Incoming tourism will increase, following the increase in 2003 with the end of the war in Iraq in April.
• The balance of payments will improve.
• Real wages will increase, after a 10% decline in the past two years. Real wages in the public sector will fall by 4% and in the business sector by 2.3% in 2003.
• The working population will grow by 2.4%, after rising 1.8% in 2003.

Published by Globes [online] - www.globes.co.il - on October 29, 2003

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Israel is, of course, not the only country to stupidly import foreign workers during periods of high unemployment.