IMF: If Arabs and Haredim Worked, GDP Would Grow by 15%

Only 20% of Arab women work, and in the ultra-Orthodox community, only 40% of men work. Both groups typically earn less than others in the same jobs.

The Israeli economy is still strong, said the International Monetary Fund in a report delivered yesterday - and then went on to list its weak points, which include heavy defense spending, housing prices, and the failure of Arabs and Haredim to work.

Israel must do something about that last issue, says the IMF, whose report is based on a two-week visit to Israel by its representatives. Only 20% of Arab women work, and in the ultra-Orthodox community, only 40% of men work. Moreover, Arabs and Haredim typically earn less than others in the same jobs, even after factoring in differences in skill sets, the IMF adds.

Haredi work
Daniel Bar-On / Jini

Poverty is especially prevalent among those two population groups, says the IMF. It projects that Israel's gross domestic product would be 15% higher than it is if Arabs and Haredim worked as much as the other population groups. The IMF begs to note than in 30 years, Arabs and Haredim will constitute about 50% of Israel's population (extrapolating from present trends), which will become a macroeconomic problem if they don't work.

The Finance Ministry and Bank of Israel reacted well to the slowdown, says the IMF, praising the economic leaders for adhering strictly to the budget and efforts to reduce the national debt. Yet for all Israel's economic strength and low unemployment (5.5% of the adult workforce), poverty is more prevalent than elsewhere in the Organization for Economic Cooperation and Development, says the report. Wages have stagnated for a decade, in inflation-adjusted terms, says the IMF: That is one reason for the grass-roots protest that erupted last summer, it says.

Also, Israel's economic growth began slowing as of the start of 2011, which has cracked confidence among consumers and businesses like, says the IMF. It does not foresee a major slowdown this year, barring external developments and assuming the central bank maintains its expansionary monetary policy. The IMF projects 3% growth this year, rising to 3.75% in 2013, led by exports.