December 2013 saw the Israeli economy receiving a ‘thumbs up’ from two important sources.

First, the OECD confirmed that “Israel’s output growth remains relatively strong, unemployment is at historically low levels, its high-tech sector continues to attract international admiration, and new off-shore gas fields have come on stream.” Similarly, the IMF has praised Israel’s growth prospects, seeing a further 3.25% improvement in 2014.

There has been much discussion recently if economic growth in Israel has been slowing down. Certainly, exports from the high tech sector have slackened off. Yesterday’s response from the Bank of Israel – the rate of interest remained unchanged at 1% – reflects a deeper analysis. Growth has stabilized to around 3.3%, close to the IMF statement.

Not all is rosy. The OECD is concerned about the widening gap in wealth distribution between the top and lowest earners, and the potential negative effects on social cohesion. The IMF referred to the potential of a housing bubble, as mortgages continue to be approved at a high rate. Structurally, there is an immediate need to reform the structure of the sea ports – slow working practices and high costs. There is no shortage of other issues that can be listed.

The situation was best described by OECD Secretary General Angel Gurria, who said that Israel:

was a source of envy among other members of the organization….(There is ) high growth, low unemployment, and high tech attract more and more investors, while natural gas can change the rules of the game.

For the Israeli economy, 2014 will commence in a positive manner. What is key to understand is how the resources from the off-shore gas fields will impact on the revenues of the Finance Ministry and then to nurture that new-found wealth.