On Wednesday, February 11, the Jan Koum Israel Studies Program at the Center on Democracy, Development and the Rule of Law welcomed Karnit Flug, former Governor of the Bank of Israel. In conversation with Amichai Magen, director of the Jan Koum Israel Studies Program, Flug examined the current condition and long-term prospects of the Israeli economy, arguing that despite its demonstrated resilience, Israel faces a growing set of structural challenges that could undermine future growth.

Flug identified slowing productivity, widening gaps in education and labor force participation, chronic underinvestment in infrastructure, and weakened governance and institutions as “gray rhinos” — highly probable but insufficiently addressed risks. She emphasized that demographic trends, particularly the expanding share of the population receiving inadequate core education, posed a fundamental threat to economic sustainability, while political instability and erosion of institutional credibility discouraged investment. Flug concluded that averting long-term economic stagnation would require renewed policy focus on education, institutional strength, infrastructure development, and inclusive growth.