Bank of Israel: Zero Per-capita Growth in 2009

Per-capita economic growth in 2009 will be 0%. The signs of an economic slowdown are already here. The industrial production index, the results of the Bank of Israel's survey of companies and the Employment Service figures - all point to a slowdown led by a drop in exports and investments," said Dr. Karnit Flug, director of the Bank of Israel's Research Department.

The slowdown will last as least another year, said Flug, speaking yesterday at a conference on insurance and pension savings.

The main cause of the extended slowdown comes from Israel being an integral part of the global economy. World trade, which increased 7% annually in recent years and contributed to Israeli economic growth, will rise only 2% in 2009. Demand will fall for Israeli exports.

She called on the treasury to focus its safety-net plan only on provident funds for older citizens, noting that this plan will hit the budget. The cabinet will have to find the proper balance between these costs and the need to continue to reduce the ratio of national debt to gross domestic product. Success here has allowed Israel to enter the current economic crisis in much better shape than many other countries.

Flug also called for a larger safety net for employment, including reducing the period of work required before employees become eligible for unemployment benefits.