Governor of the Bank of Israel Dr. Karnit Flug today addressed the
Annual Conference to Promote Exports by Minorities, held in Nazareth. The conference was organized by the Ministry for Social Equality, the Ministry of Economy and Industry, and the Israel Export Institute.


In her lecture, the Governor reviewed Israel’s current economic environment, and noted that the macroeconomic situation is good: in recent months there have been signs of more balanced growth, reflected in a greater contribution of exports to growth, after it had been driven by private consumption in recent years. The positive macroeconomic picture is reflected in strong labor market data, including a decline in unemployment rates at all levels of education and for all regions and population groups.


The Governor also presented the long-term trends and challenges facing Israel’s exports. One of the main challenges is the need to improve productivity, which is the key to the tradable sector’s competitiveness. The Governor reviewed the main areas in which the government needs to focus in order to improve productivity:

  • Improving human capital: Work to increase the level of basic skills and the scope of technological content through increasing efficiency and increasing the investment in the education system and in professional training.
  • Improving physical capital: Encourage investment in infrastructures. The investment in physical capital complements investment by the private sector.
  • Taking steps to improve the business operating environment; continued improvement of regulation and reduction of bureaucracy.
  • Removing barriers blocking exposure to competition from the rest of the world.
  • Providing incentives and support for implementing technological improvements in low technology industries, including in services.
  • Increasing support by the Chief Scientist in research and development budgets.

At the end of her lecture, the Governor referred to the many companies reporting difficulty in recruiting skilled workers as a main constraint to their expansion, and that the demand for engineers in manufacturing and in the high tech industry exceeds supply. In parallel, the number of Arab engineering students is increasing in a manner that can contribute to their integration into industries that are seeking a skilled workforce. This situation, of a shortage of skilled workers, creates an opportunity to advance the integration of workers from Arab society into the labor market in all industries, including high tech.