by international comparison, despite the fact that national savings is not low, as we showed in the bank of israel annual report for 2016. therefore, not only are we not close the gap in capital per worker relative to other economies, the gap is even growing. by the way, the investments that increased in 2016 were mainly in residential construction and in the electronic components industry, but not in the other industries, such that the increase in investments made a relatively small contribution to a broad increase in 3 / 4 bis central bankers'speeches production capacity. a factor that is complementary to private sector investment is government investment in infrastructure. despite some increase in the past two years, the level of this investment remains lower than it was at the beginning of the decade. as a result, the stock of capital in the economy is lower than the average in the other advanced economies. exports as a share of gdp also declined in recent years, affected by the weakness in world trade and the strengthening of the shekel. this fact is not harbinger of good news in terms of the dynamics of productivity. in this context, we can examine what happened to labor productivity in israel over time. despite its low level at the point of departure in 1995, its pace of growth was lower than what could have been expected given the fact that in general, the increase in productivity is greater in economies that begin from a lower point, if only because of their ability to adopt technologies that exist in countries at the technological forefront. the fact that the productivity gap has not been closed is particularly disappointing given that growth in productivity in the other advanced economies has also been relatively low in recent years. other than the composition of growth and the insufficient level of infrastructure, i have discussed other reasons for the low level of productivity at various opportunities. the main reasons are unsuitable human capital, as shown by the piaac tests examining the cognitive skills of the adult population in israel — such as problem solving skills in a digital environment — the problem of excessive and inefficient bureaucracy, and the fact that the economy is not sufficiently open to international competition in various aspects, such as the attitude toward competitive supply from abroad or relatively high non - tariff barriers. the question of the implications of growth led by consumption over the long term has been discussed by various international entities in recent years, and the main conclusions from their studies are similar to the analysis we have conducted. such growth tends to be weaker, and it also generally leads to lower future growth. the reason for

income from labor, as a result of an increase in employment and in wages. there was an increase in home prices and in the value of financial assets. outstanding consumer credit ( nonhousing credit to households ) increased by 25 percent over the past three years, as interest rates declined. together with the lower prices on imported consumer goods, against the background of the appreciation of the shekel in recent years, which led to a rapid increase in the import of consumer goods, these all supported the rapid increase in consumption. is the growth in private consumption a phenomenon that is unique to the israeli economy? apparently not. before the global economic crisis, global growth was relatively balanced, in that it was led not only by private consumption, but also by other uses, chiefly investment. in the years after the exit from the “ pit ” of the crisis, since 2012, in most countries growth has been led by private consumption, while investment has been stagnating. it is worth noting that the first quarter of 2017 looks to be different. in most economies, including israel, the figures for the first quarter are unusual in the sense that investment was again a significant factor in contributing to growth. however, it is obviously too soon to determine that this quarter indicates a change in trend or a turnaround. of course, there are positive aspects to the fact that private consumption increased relatively rapidly. beyond the fact that it has led to an increase in the standard of living in the short term, 2 / 4 bis central bankers'speeches the increase in private consumption also covered for the more moderate growth of exports and investments, which was at least partially a result of exogenous factors. with the help of macroeconomic policy, the increase in private consumption thus contributed to smoothing the business cycle. it enabled the economy to continue growing and to lead to a clear improvement in labor market data as i outlined earlier. however, the fact that growth was led by private consumption also comes with risks. those risks mainly have to do with the question of whether such growth is sustainable, or whether it comes with a risk of a sharp turnaround. the answer to that question has to do with the sources upon which the economic growth rests. as long as growth relies to a greater extent on increased consumer credit, a sharp increase in the future debt servicing burden may put the ability to continue consuming in the future at risk. as long as the increase relies more on an increase in asset prices — the “ wealth effect ” — and as long