IMF, World Bank: Growth to Decline to 3.9% in 2006

WASHINGTON - The International Monetary Fund and World Bank expect Israel's growth rate to decline to 3.9 percent in 2006, compared to an expected growth rate of 4.2 percent this year.

This prediction - included in the IMF's annual report that was published yesterday - is similar to Finance Ministry and Bank of Israel forecasts issued recently. Both of those agencies also predicted that growth would decline in 2006. The similarity comes as no surprise, because the IMF generally consults with the treasury and central bank before preparing its report.

By Western standards, the report noted, Israel's growth rate next year still will be high: The only Western country for which it forecast higher growth in 2006 is Ireland (4.9 percent). However, 3.9 percent is low compared to the growth rates of many developing countries.

The IMF predicted that Israel will have an inflation rate of 2.3 percent and a balance of payments surplus of $1.3 billion in 2006. It said that next year's growth will be fueled by both high-tech exports and a rise in private consumption.

Despite this generally positive picture, the report warned, there is a major threat hanging over the Israeli economy: a public debt that exceeds 100 percent of gross domestic product. According to the Maastricht criteria adopted by the European Union, public debt should not exceed 60 percent of GDP.