Bank of Israel Governor Amir Yaron told the Knesset Finance Committee today (Tuesday) that it might be possible to reduce the interest rate once or twice in the second half of 2025 thanks to the increase in VAT and expected lower inflation in half a year.
However, he qualified this statement by saying that "there is great uncertainty, we will act according to how the data develops. If we see a better scenario, we can act earlier. If we see inflation data that's stuck, we'll need to be more conservative."
Meanwhile, Dr. Ron Tomer, President of the Israeli Manufacturers Association, said at a conference in Eilat that "The number one problem for Israel's economy and labor market today is the shortage of workers. Just in the leading defense companies, there are currently about 6,000 worker shortages, and in their supply chain industries, there are about 4,000 additional missing workers. In the rest of the industry and economy, the shortage is also severe. In total, there are tens of thousands of missing workers - which is a lot, it's stopping economic growth, and the question is where we'll find them."
He then elaborated on the importance and urgency of solving this problem: "War costs a lot of money, and the only way to return this money and channel it into the state treasury is to return the economy to high growth, but for this, we need skilled workers who will help businesses grow. Workers are, after all, an important and significant resource for any business. In this context, it should also be noted that the wages in Israeli industry are higher than the average wage in the economy, and it leads productivity in the economy, and of course, industry makes the periphery flourish. Therefore, the number one national mission of the government should be integrating populations into the labor market and training existing workers for industrial professions - and this training needs to be on steroids so that there will be as many new workers in the economy as quickly as possible."
Tomer ended by noting that this could also help rebuild the south and north following the war: "One of the main ways to lead the economy to growth is also to invest effort in helping small and medium-sized factories to grow, with the focus needing to be on the periphery to create new jobs in the north and south. If the evacuees have new jobs in the periphery, they will return to the abandoned settlements."
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