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Half a year after the second Lebanon war had ended, the Israeli economy can be said to have completely recovered. "The business sector has returned to its situation of before the war," stated Macro, the Center for Political Economics, yesterday.

Although Israel's economic condition deteriorated in the second half of 2006 versus the first half of 2006, because of the war, Macro says its expectations for the first half of 2007 are positive.

Macro forecasts economic growth of 4% to 5% this year, and inflation of about 2%, which is exactly in the middle of the central bank's target range.

Strong global economic growth also supports the high growth forecast for the Israeli economy, Macro's report asserts.

There was no real improvement in socioeconomic issues during the period the report covered, save for a drop in unemployment. Income distribution gaps remained high.

The report concludes that Israel?s brisk economic growth has yet to be translated into a real reduction in the scope of poverty.

"After six years of cutting back public expenditure in social areas," the report observes, "the improved economic situation can certainly serve as a tool in the hands of the government for reducing poverty and income distribution gaps."

Macro cautioned that without a serious plan for attacking these problems it would be impossible to see an improvement in poverty and wage gaps in 2007 or 2008.

Macro Director General Roby Nathanson commented that the economic status index, which hit a low point on a scale of one to nine in 2002, Israel's economic rating has steadily improved.

The only significant setback came during the previous three quarters and was related to expectations of the war's effect on the economy. However, he added, expectations for growth rise from quarter to quarter, which is consistent with the growth data the country is currently presenting.