While Israel treasury officials continue to boast the stability of the national economy and how Israel escaped the global recession, Finance Ministry economic Assaf Geva has a bit of a different view of today’s economic reality. It is most significant to realize that for the past 18 months Geva has been studying the Central Bureau of Statistics (CBS) demographic projections released two years ago, and his remarks are based on his findings.
According to the Haaretz report, Geva explains that as the nation ages, government spending will increase 1.2% faster than the GDP each year. He explains that government earning will increase 0.4% more than the GDP annually, partially due to the new natural gas realities, but this aside, the revenue from income tax will decline as the population ages.
The CBS adds that while the Israeli Arab and chareidi populations continue growing at a fast pace, they both have high unemployment. The projected chareidi population by 2059 will increase by 26.6% as compared to today’s 11.1%. The Israeli Arab population is expected to increase as well, albeit less significantly, to 23.1% as compared to 20.9% today.
Geva explains that these realities will result in spending exceeding government income by 0/8% annually, which amount to about 9 billion NIS. Hence the current trend of a reduction in the national debt from today’s 67% of the GDP will reverse come 2030, and by 2059 is will reach 88%. Geva is calling on raising the national retirement age to 69 or both men and women and failure to do so could have dire consequences including an annual deficit reaching 2.4%, amounting to 25 billion NIS.
Realizing the severity of the situation an economic stabilization plan has been implemented towards economic reforms including budgetary cuts.
(YWN – Israel Desk, Jerusalem)
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2 Responses
The headline does not reflect the article. The study does not in any way challenge the positive assessments of Israel’s current economy. It’s issue is a perceived threat to Israel’s economy in the long term (projecting 15 and 45 years into the future) from growing Arab and charedi populations. And demographic, social and economic projections 45 years into the future of Israel, while not completely pointless, are tenuous in the extreme.
Israeli economic statistics should be taken with a much larger grain of salt than ones from western countries. In particularly, the hareidim are a large sector whose economic activities are often not taken into account (since many hareidim are officially learning full time are not counted as part of the labor force, but are in fact employed in ways that produce income for their families and generate consumption).
One should look at such factors as money spent on discretionary spending (wedding halls and other simchas, vacations, car ownership, apartment prices) to gage how the economy is doing – at last as far as hareidim are concerned.