JERUSALEM, March 20- Incumbent Israeli Prime Minister Benjamin Netanyahu is expected to start forming a new ruling coalition next week after winning parliamentary elections.

Observers believe that as he embarks on his fourth term, Netanyahu would face daunting tasks of solving security and socio-economic concerns of Israeli voters.

Netanyahu's right-wing Likud party gained one-fourth of the 120 Knesset (parliament) seats. Altogether, his right-wing allies, the ultra-orthodox parties and former Likud member Moshe Kahlon's Kulanu Party can give him a majority of 66 seats in the parliament.

"I think from his point of view what he (Netanyahu) has achieved is a greater ability to govern in terms of having a solid majority in his government without opposition forces from within, which is the problem that he had in the last government," Dr. Gershon Baskin, co-chairman of the Israel Palestine Center for Research and Information, told Xinhua.

A solid majority the Likud and its allies enjoy in the parliament would give Netanyahu a stronger mandate to carry out economic reforms in the housing sector and other economic areas, which he failed to launch in his previous terms.

Though Netanyahu clinched the stunning election victory by campaigning mainly on security issues, such as Iran and the Palestinian issue, calls for reforms to tackle socio-economic woes were resounding in Tuesday's election, as reflected by the rise of the center Kulanu party and the fact that the center Yesh Atid remains a major force in the new parliament.

Socio-economic problems started to gain the attention of Israel's society even before the 2013 parliamentary elections. In2011, tens of thousand of Israelis took to the streets to protest the high cost of living and the housing crisis, leading to the rise of the Yesh Atid party in the 2013 elections.

A recent official report revealed that between 2009 and 2013, housing prices in Israel jumped by 55 percent. Whilst in January2008 Israelis needed 103 monthly salaries to purchase an apartment, by the end of 2013 it had reached 137 salaries.

Currently, 148 salaries are needed to buy an apartment, compared to an average of 65 salaries in the United States, Britain and the Netherlands. The housing crisis has struck hard Israel's middle class and youngsters.

Netanyahu, who admitted before the elections his failure to give due attention to socio-economic issues, is expected to appoint Mose Kahlon, the leader of the Kulanu as finance minister and assign him the task of implementing reforms to solve the housing crisis.

Kahlon, who served as communications minister in Netanyahu's cabinet from 2009 to 2012, has been known and popular for his successful reforms in the communications sector, which dramatically reduced the rates of cellular calls in Israel.

"By giving Kahlon finance and making him the housing tsar, Netanyahu will reassure Israelis that he is sincerely tuned to their aspirations," said Uri Dromi, executive director of the Jerusalem Press Club, in an op-ed.

Netanyahu's new government will also have to address, among other security-diplomatic issues, the long-stalled peace talks between Israel and the Palestinians, which has led to increasing isolation of Israel on the international arena.

Unlike such security threats as Hezbollah and Hamas, the peace process can't be coped with through military means, Dromi wrote, adding that it requires Netanyahu to act as a stateman.

Observers believe that if Netanyahu refuses to revert his pre-election farright statements relating to the Palestinians, Israel may face growing pressure from the U.S. administration and European countries and further isolation.

In order to win over right-wing voters, Netanyahu stated before the elections that there will be no Palestinian state if he was re-elected.

He also promised to continue construction in Jewish settlements in the West Bank and east Jerusalem, where the Palestinians seek to build their own state.

"He as prime minister of Israel is going to be facing a reality on the ground locally, regionally and internationally, where as he declared prior to the elections there is no longer a two-state solution to the Israeli-Palestinian conflict.

In the absence of any other alternative, certainly Netanyahu never presented an alternative, we're going to face a growing reality of international isolation of Israel as a pariah state, which has created a one-state reality with two unequal peoples all under Israel's control.

That in the world they call apartheid and the world is not willing to accept apartheid," Baskin told Xinhua.

Dromi echoed Baskin's opinion. "Without a bold move in this arena, Israel will eventually become one binational state, where it either loses its Jewish identity or its democracy, or both," he said.

Baskin predicts that lack of dialogue between Israel and the Palestinians may escalate the current tension between the two sides over the Palestinians' entry into the International Criminal Court in The Hague (ICC), and give rise to more Palestinian violence.

"The question is are you going to push the Palestinians to a new round of violence? I think this is inevitable we're going to see another explosion from Gaza and it's going to happen in the West Bank as well.

If we have no positive movement toward any kind of real dialogue and improving the conditions of life for the Palestinian people their going to join the extremist forces that are fighting against Israel," he said.

Palestinian officials have already called on Netanyahu to reaffirm its support for the two-state solution to the Israeli-Palestinian conflict, under which an independent Palestinian state will exist alongside Israel.

Palestinian President Mahoud Abbas said Wednesday Netanyahu's reversal of his support for the establishment of a Palestinian state would mean no political solution to the conflict.

Netanyahu's far-right statements prior to the elections have also caused concern in the Obama administration. White House Press Secretary Josh Earnest said Thursday the United States would reevaluate its position on the Israeli-Palestinian conflict after Netanyahu categorically dropped his support for the two-state solution.

It remains unknown whether Netanyahu will readjust his pre-election embrace of far-right positions on the Palestinian issue under the Obama administration's pressure in the near future.