First, let me conclude that a long term financial investment in Israel, insofar as it is handled prudently and with sober caution, pays huge dividends to those who trust in Israel's future, abilities and talents -- global investors are indeed showing its confidence in the future of the country by investing in record numbers and in every field.

Second, I realize that 800,000 people are below Israel's own marker of what constitutes a poverty line. Much work has to be done. Concern and care for the poor will always be a top priority and they must not be left behind, but I also believe that it was largely Benjamin Netanyahu economic policies that succeeded in stopping a dangerous trend of moving from privatization to a EUro-like welfare state. The best way out of poverty (imho) is the freedom to work using your God given talents and grow your way out of poverty.

The Israeli economy is doing extremely well, and the strong macroeconomic conditions set forth by Netanyahu will make Israel's prospects for continued growth quite strong, "notwithstanding political uncertainties and the latest hostilities," declared the International Monetary Fund report that's follows.

And now on to the IMF Executive Board, which Concludes 2006 Article IV Consultation with the State of Israel.
From news article:

Strong macroeconomic conditions and sound domestic policies have significantly improved Israel's growth performance and prospects, notwithstanding political uncertainties and the hostilities in the north during the summer of 2006. Since 2004, the economy expanded in the 4-6 percent range annually, with real GDP growth reaching an estimated 5.0 percent in 2006. Key drivers of the expansion included improving internal security and productivity; buoyant external demand; exceptionally benign financial conditions, notably falling risk premia; and sound macroeconomic policies.

Concurrently, the current account surplus continued to widen to an estimated 5 percent of GDP for 2006.

Inflationary pressures are subdued and monetary policy has been easing as of late. As spare capacity was reduced through mid 2006, inflationary pressure first built and the Bank of Israel (BoI) raised its policy rate to 5.5 percent for August 2006. However, since then an appreciation of the sheqel has been passing through swiftly to domestic prices and energy prices have fallen. As a result, Consumer Price Index inflation moved below the BoI's 1-3 percent target range and the Bank cut its policy rate in several steps to 4.5 percent.

Tight expenditure policy together with the recovery reduced the central government budget deficit to 0.9 percent of GDP in 2006, notwithstanding unexpected expenditure related to the hostilities in the north. For 2007, the central government budget deficit is expected to widen on account of higher expenditure related to these hostilities and moderating revenue growth but is targeted not to exceed 2.9 percent of GDP. The public debt-to-GDP ratio has been falling faster than expected but remains high at just under 90 percent of GDP.

Financial soundness indicators have been recovering although some weaknesses on bank balance sheets that relate mainly to previous boom-bust cycles remain. Financial markets performed well during 2006 and the improved economic outlook and enhanced fiscal policy and credibility continued to attract strong foreign capital inflows.

For 2007, real GDP growth is forecast around 4½ percent.

Link: http://www.imf.org/external/np/sec/pn/2007/pn076.htm

Recap:

● Inflation stays within the 1-3 percent target range set by the Central Bank (Prof. Stanley Fischer,vice chairman of Citigroup was called by Netanyahu to become governor of the Bank of Israel, hails from New York)

● Unemployment will drop from 8.6 percent to 8.2 percent - much better than the EU as a whole

● The rate of growth in exports of goods and services is expected to increase to 5.2 percent in 2007 -- much better than the US

● Government debt, as a percentage of GDP, will continue to decline. Having dropped significantly between 2004 and 2006, from 100.9 percent to 88.0 percent, the decline is expected to be more moderate in 2007, to 86.5 percent.

I think tourism was a disapointment. 2006 started off well hopes were dashed by the war in Lebanon. The tourism industry in 2007 hopes to return to the record numbers of 2005.

Sure, the Israeli eletorate continues to debate income distribution and set forth policies that brings equity and justice to the less fortunate, but overall, I think we're looking at an Israeli economy that is blessed and should continue to do well for the long-term.

^_^