Bank of Israel Chief: Economic Reforms Require Lasting Government

'Big challenges facing the economy will require gradual reforms that only a stable, long-lasting government can advance,' says Karnit Flug.

Tomer Appelbaum

Israel’s economy is generally immune to political shocks but the reforms needed to boost economic growth require the next government elected in March to be long-lasting and stable, Bank of Israel Governor Karnit Flug said on Sunday.

Flug said instability in the months leading up to the March 17 election and while a ruling coalition is formed, makes it difficult to take economic decisions.

“Though the economy is in a certain slowdown ... it is stable and experience shows it’s immune to shocks in general, and to political shocks in particular,” she said at a business conference.

“There is no doubt that the big challenges facing the economy will require gradual reforms that only a stable, long-lasting government can advance.”

Israel’s governing coalition collapsed last week after just 20 months, with the country moving to an election campaign for the next three months.

Economic growth is forecast at 2.2 percent in 2014, hurt by a Gaza war in July and August that harmed tourism, production and consumer spending.

The Bank of Israel has held its benchmark interest rate at an all-time low of 0.25 percent at its last three decisions after rates were reduced in July and August to support economic growth.