However you twist the figures, the speed of the Israeli economic recovery is slowing down. The latest report from the Central Bureau of Statistics argues that: –

Economic indicators for the April- June period point to a continued slowdown in the pace of growth in imports of raw materials, trade and services revenue, industrial production and credit-card purchases….

Over the past 6 months, annualised GDP growth has dipped off by about 1.0 % to around 3.5% . On the other hand, the predictions for 2011 remain strong.

Citigroup expects the economy to grow 3.2% in 2010 and 4.2% in 2011. The Bank of Israel forecast is for the economy to grow 3.7% in 2010 and 4.0% in 2011.

Stanley Fischer, governor of the Bank of Israel, has pointed out several times that Israel was fortunate during the initial stages of the credit crisis. As the country was going through a general election, central government was weak. Nobody in authority was around to push through a large fiscal package. Debt did not go through the roof, as in the UK and elsewhere.

Yet last week,  a report was issued in America, which details why the very opposite was true for Washington.

Alan Blinder, a professor at Princeton, and Mark Zandi of Moody’s Economics (and one of the chief economic advisors to the McCain Campaign)….. argue that without any of the responses, 2010 GDP would have been 11.5% lower than it is likely to turn out, payroll employment would have been 8.5 million lower and we would now be facing outright deflation rather than just being at risk of falling into it, as we are now.

True, the American and Israeli economies faced very different challenges 2 years ago. For a start, Israel’s banks were sound.

However, there may be a need to move the local debate along. Today, Israel’s high tech sector needs help to reposition itself. The ultra orthodox and minority communities are not engaged in the labour force as the rest of society is. Infrastructure in the north and south remains weaker compared to the centre of the country. Primary and secondary education standards are continuing to slide.

None of the these are impossible issues to resolve. All require financial direction (and leadership) from the centre. Is it time to relax the purse strings?