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Israel sees moderate growth amidst slow hi-tech exports

Xinhua, April 4, 2016 Adjust font size:

Israel recorded a moderate economic growth in 2015, as its hi-tech industry, a principal growth engine, has stalled, the country's central bank said Sunday.

The economy grew last year by 2.5 percent after growing 2.6 percent in 2014, the Bank of Israel said in its annual report. The Bank estimates that the economy will grow 2.8 percent in 2016.

The hampered economic growth was attributed mainly to the slowdown in international markets since 2008, said the bank's economists. Export of business services shrunk by 2.5 percent in 2015.

"The decrease in exports of business services has been particularly notable in the hi-tech industry," the report said.

"It is possible that the sector's potential for quick growth has been exhausted, now that leading international companies have already opened research and development centers in Israel," according to the report.

At the same time, the labor market "continued to show robustness in 2015," the reported noted. Unemployment rates, which have been declining over the past five years, dropped to 5.3 percent in 2015 after reaching 5.9 percent in 2014, its lowest level in three decades.

According to the central bank governor Karnit Flug, the drop was the result of an "increase in employment-intensive commerce and business services -- as well as increased employment in the public services."

Flug warned of growing inequalities in Israel, which holds some of the highest rates of poverty and inequalities among the OECD's developed nations.

She urged the government to improve the education system to reduce the growing income gap and expand the government's investment in public services.

Prime Minister Benjamin Netanyahu welcomed the report, declaring that the "economy is at full employment."

"The key to the future depends on growth," he said at his weekly cabinet meeting, according to a statement released by his office.

He also noted the beginning of talks on a free trade agreement with China last week.

"This has been a goal for the State of Israel for many years. It has the potential for a very significant growth in exports," said Netanyahu. Endit