The current Israeli government has just entered its second year of work. Twelve months ago, there was no budget, a concern for a runaway expenditure and no chosen replacement for the governor of the central bank.

And today? The question remains if the economy is sliding into a recession? With growth rates seemingly at a little more than 3%, that is a full percentage point below the average triumphs of the past decade. What next?

Karnit Flug, the new BOI governor, offered a way forward in a recent interview. Basically, Israel’s economy is very sound. And her words were given further importance this week, when the latest set of trade figures were announced, revealing a sharp narrowing of the country’s trade deficit.

Let’s be clear, Israel’s economy is still restricted by some old-fashioned structural issues. The ports are dominated by unions. The same can be said about the monopolistic Electricity Company. The prices of many basic commodities remain high due to protective practices of interest groups. Small businesses are handicapped by red tape.

For all that, Israel has not had a recession for over a decade. If you ignore the ‘imposed dip’ in the first half of 2009 – a consequence of the global credit crunch – Israel’s financial planners have ensured that the country has achieved annual growth rates of over 4% for years. Few members of the OECD can boast such an achievement.

As for 2014, the government is looking to shift expenditure away from the defense monolith. The new off-shore energy industry is starting to produce significant revenues for the treasury. Inflation is within target levels. There are some initial signs that the housing bubble may be coming to an end.

If all those factors culminate in ‘only’ 3 – 3.5% growth, that is not a recession, but a relative slowdown in expansion. The Israeli economy appears well-placed to meet the next series of challenges that could be thrown at it.