“The existence of strong and independent institutions (such as the Bank of Israel or the court system) are essential for the stability and prosperity of the economy over time,” states Bank of Israel Governor Prof. Amir Yaron, in the bank’s report for 2022 published yesterday.
According to him, “the legislative processes being discussed these days in Israel, against the background of financial developments in the world, sharpen the need to ensure the independence and professionalism of the institutions in Israel and the need for significant changes to be made by broad consensus.”
In the annual report, it was again determined that the contribution of the interest rate increase to the decrease in housing prices is not significant. The drop in the prices of new apartments attributed to the last few months is explained by the increase in inventory with contractors due to the increase in the rate of construction starts in 2022 and due to the increase in their financing costs.
In addition, the increase in interest rates on mortgages makes it difficult for young couples to obtain the capital required to buy an apartment. The review dedicates a special chapter to energy issues.
It was determined that Israel was able to maintain moderate inflation relative to the US and Europe thanks to a NIS 3 billion subsidy on energy and gas prices. The low prices in Israel are also explained by energy independence, thanks to the discovery of the Tamar and Leviathan gas reserves.
The gas outline helped maintain the stability of the gas supply to Israel. However, the bank warns that the agreements that set the prices may once again create a situation where natural gas prices in the world are actually lower than in Israel.
The Bank of Israel believes that the wage agreement in the public sector signed with the Histadrut will result in a relatively moderate increase in wages, which will not create inflationary pressures.
In relation to employment in the economy, it becomes clear that while the Arab youth are reducing gaps and rely less on the government, among ultra-Orthodox youth the gaps are widening, they are less academic, there is stagnation in the employment of ultra-Orthodox men, and ultra-Orthodox households rely more on government allowances.
Against this background, it is important to increase productivity among the ultra-Orthodox population, and one of the barriers to academization is the lack of Liva studies. Let us recall that, unlike in the past, the budgeting of ultra-Orthodox educational institutions is not conditioned on Liva studies or other obligations to enter the labor market.