Flug: Israeli economy in good state
In first public address since government approved her appointment as Bank of Israel governor, Dr. Karnit Flug tells Prime Minister's Conference: 'The growth rates in Israel are relatively high and the economy is in good condition compared to developed countries'
"Unemployment rates have dropped to a low level after going up during the crisis, but the output per worker is relatively low compared to the developed countries," Flug told the Prime Minister's Conference on Partnership and Growth, organized by the Authority for the Economic Development of the Arab, Druze and Circassian Sectors.
At the start of her address she said, "When I decided, several weeks ago, to accept the invitation to participate in this conference, I did not know that it would be my first public lecture since the government's decision to recommend that the president appoint me Bank of Israel governor, who also serves as the government's economic advisor.
"Nonetheless, I am very happy that this coincidence has led to me speak here today, two days after the government's decision, as I believe this conference deals with one of the most important issues on the State of Israel's social-economic agenda."
Flug added that "in the labor market our situation is relatively good. Unemployment rates have dropped to a low level after going up during the crisis. This reflects the integration of different sectors. The inflation rate is relatively low, allowing us to cut interest rates and support the growth and employment.
'Arab, haredi integration highly important'
On the other hand," Flug said, "the gap between the productivity here and in the developed countries is growing. The investment per worker is relatively low in terms of capital and technologies, and people who do work – work few hours.
"Among haredi men and Arab women, employment rates are particularly low compared to the rest of the population. Their limited integration in employment negatively affects the ability to grow in the future.
"The Arabs are 20% of the population, the haredim are 10%. Their numbers will increase in the coming years, and so the importance of their integration is particularly high. The current employment rates in these populations and the ageing of the population will subtract 1.3 of the future growth rate in the coming years every year.
"We must also deal with the low productivity level and low wages in these populations. The government had set a target for the integration of these populations – Arab men 78%, Arab women 41% (today, Arab men's integration rate is 74%, and the women's is 29%).
"There is a some way to go before we meet these targets by making important decisions in the areas of education, improving accessibility, lifting cultural barriers, encouraging small businesses and handling discrimination. A correct policy on the matter will bear fruit, and if we fail to do so we will pay a heavy price in the coming years."
The government unanimously approved Flug's appointment as Bank of Israel governor unanimously on Sunday. Prime Minister Benjamin Netanyahu said following the vote that "Karnit Flug has the suitable background and experience and has been filling her position in the past few months very well.
"While successfully navigating the Israeli economy in the face of the global crisis, we must ensure that Israel's economic leadership continues to advance growth and employment, increase exports and reduce housing prices. We wish Karnit Flug the best of luck." .
