The good news is that Israel’s economy is probably the strongest it’s ever been.
- GDP grew 4.7% in 2010.
- GDP projection for 2011 is 5% and 2012 is 4.2 % (conservatively).
- Unemployment has fallen to an all time low of 6% closing in on full employment.
- Interest rates are low.
- Per capita income is $30,000
So what’s the problem? According to Bank of Israel Governor Stanley Fisher, “Why are we worried? Because (housing) prices are rising by 16%, which means that prices will double within five years. This has to stop. The question is whether it will stop in a way that won’t harm the economy.”
Deputy BOI Governor Eckstein explained that the housing market increases were based on supply and demand. There just aren’t enough new housing starts. Eckstein said that the Israeli economy was sound and strong in terms of consumption, exports, unemployment, and other factors. “The risks and opportunities in the Israeli housing market are due to demand and consumption. Fiscal credibility and stability are important factors in the stability of the Israeli economy.”
Meanwhile Prime Minister Netanyahu is pushing a new “supertanker” housing plan to build over 113,000 new housing units over the next five years to help the situation.