On behalf of the Israeli authorities, we thank the Article IV mission team for an excellent report and for the candid, constructive and friendly dialogue. The authorities broadly agree with the analysis and recommendations in the report. Overall, the macroeconomic performance of the economy is strong, especially compared to other advanced economies. Growth has accelerated in 2016, labor force participation is at an all-time high, the unemployment rate is at its lowest level since the 1970s, debt-GDP ratio has been on a declining path for over a decade and the financial system is strong. Nevertheless, the economy faces structural challenges, mainly demographic dynamics that weigh on labor productivity and rising house prices. The authorities acknowledge these challenges and are taking actions to confront them. In the following comments we elaborate on the authorities’ views and actions and provide additional perspectives to the staff report.
It should be noted that while economic activity has firmed up during 2016, the early readings of the national accounts pointed to substantial weakness. At the time, they provided further support for maintaining an accommodative monetary position.
For comparison, the participation rate of the non-Haredi non-Arab population has improved as well but at much less impressive rates, from 79.8 percent to 87.4.