Demographic trends in Israel and worldwide provide an obstacle to continued economic growth, Bank of Israel Governor Dr. Karnit Flug warned today.
She said that Israel's aging population and the rise in the proportion of Haredim and Arabs in the population will bring about a major slowdown in future GDP growth and harm economic prosperity, if the gap is not narrowed between the general population and Haredim in relevant education for jobs, and if the trend of integrating Arabs and Haredim into the workforce is not continued.
In a lecture to the Israel Economic Association, she presented two future economic scenarios for Israel: the first entitled "convergence" assumes the narrowing of relevant education gaps and employment rates in the coming years and the second assumes no change. In the second no change scenario, the rate of productivity growth which is currently 1.4% annually would fall to 0.5% (the average for 2000-2059). In the "convergence" scenario, the rate of productivity growth would fall to just 0.8%.
Dr. Flug said, "If we don't influence the fundamental causes that are bringing about lower productivity and slower growth, not only will we fail to catch up with the productivity levels of the most advanced Western countries but the demographic trends and processes to realize the rise in the educational levels that we are currently seeing will work to significantly slow down the rate of future GDP per capita growth."
The Bank of Israel's demographic forecast sees Israel's non-Haredi Jewish population falling from 70% of Israelis today to 50% in 50 years-time.
Published by Globes [online], Israel business news - www.globes-online.com - on June 1, 2015
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