| Economy of Israel | |
|---|---|
 Rothschild Boulevard, a center of Israeli finance | |
| Rank | 24th (According to the World Economic Forum Global Competiveness report)
|
| Currency | New Israeli Shekel (NIS) |
| Fiscal year | Calendar Year |
| Trade organisations | BIS, CLS Bank, EBRD, IADB, ICC, ISO,ITUC, OECD, UN economic bodies,WCO, WFTU, WTO. |
| Statistics | |
| GDP | $206.9 billion (2009 est.) |
| GDP growth | 4.2% (2008 est.), 0.5% (2009 est.) |
| GDP per capita | $28,900 (2008 est.) |
| GDP by sector | agriculture (2.7%), industry (31.7%), services (65.6%) (2008 est.) |
| Inflation (CPI) | 2.5% (2010 est.) |
| Population below poverty line | 23.6% (2007), note that Haredim and Arabs make up about 25% of Israel's population, and account for most of the poverty |
| Gini index | 39.2 (2008) |
| Labour force | 3.01 million (2008 est.) |
| Labour force by occupation | Agriculture (2%), Industry (16%), Services (82%) (30 September 2008) |
| Unemployment | 6.2% (July 2010) |
| Main industries | high-technology projects (including aviation, communications, computer-aided design and manufacture,medical electronics, fiber optics), wood and paper products, potash andphosphates, food, beverages, and tobacco, caustic soda, cement, construction, metal products, chemical products, plastics, diamond cutting,textiles and footwear |
| Ease of Doing Business Rank | 29th |
| External | |
| Exports | $44.35 billion f.o.b. (2009 est.) |
| Export goods | machinery and equipment, software, cut diamonds, agricultural products, chemicals, textiles and apparel, military equipment, food. |
| Main export partners | US 32.5%, Belgium 7.5%, Hong Kong 6.7% (2008) |
| Imports | $47.4 billion f.o.b. (2009 est.) |
| Import goods | raw materials, military equipment, investment goods, rough diamonds, fuels, grain, consumer goods |
| Main import partners | United States 12.3%, Belgium 6.5%, Germany 6.0%, China 6.5%, Switzerland 6.1%(2008) |
| Public finances | |
| Public debt | 78% of GDP (2009 est.) |
| Revenues | $45 billion (2008 est.) |
| Expenses | $58.6 billion (2009 est.) |
| Main data source: CIA World Fact Book All values, unless otherwise stated, are in US dollars | |
The economy of Israel is a diversified market economy with moderate state ownership and a rapidly developing high-tech sector, which is backed by a thriving Venture capital industry. Israel possesses a substantial service sector and the Israel diamond industry is one of the world's centers for diamond cutting and polishing. It is also a world leader in software development and is a major tourist destination. The major industrial sectors include metal products, electronic and biomedical equipment, processed foods, chemicals, and transport equipment. Relatively poor in natural resources, Israel depends on imports of petroleum, coal, food, uncut diamonds and production inputs, though the country's nearly total reliance on energy imports may change with recent discoveries of large gas reserves off its coast. The high concentration of high-tech industries in Israel, gave it the nickname "Silicon Wadi", which is considered second in importance only to its Californian counterpart.
In September 2010, Israel joined the OECD, which praised Israel's scientific and technological progress and described it as having "produced outstanding outcomes on a world scale." Israel has also signed free trade agreements with the European Union, the United States, the European Free Trade Association, Turkey, Mexico, Canada, Jordan, Egypt, and on 18 December 2007, became the first non-Latin American country to sign a free trade agreement with the Mercosur trade bloc.
The country's GDP (Purchasing power parity) in 2006 reached $195 billion according to the International Monetary Fund or $179 billion according to the World Bank (see List of countries by GDP (PPP)). GDP per capita has been $31,767 according to the International Monetary Fund in 2007 or $26,200 in 2006 according to the CIA World Factbook. The economy grew by 8% in the last quarter of 2006, faster than any of its Western counterparts.
American billionaires and business tycoons including Bill Gates, Cole Roberts, Warren Buffett, and Donald Trump have each praised Israel’s economic environment, and the country was the destination for Berkshire Hathaway's first investment outside of the USA when it purchased ISCAR Metalworking, and the first research and development centers outside the USA for companies including Intel and Microsoft.
One of the biggest challenges facing the future of the Israeli economy is the growing number of Ultra-Orthodox Jews who prohibit non-religious education, particularly for boys, and there is a low level of official labor force participation amongst men. The governor of the Bank of Israel, Stanley Fischer, stated that the growing poverty amongst the Ultra-Orthodox is hurting the Israeli economy.
History
Pre-state Jewish economy
The first survey of the Dead Sea in 1911, by the Russian Jewish engineer Moshe Novomeysky, led to the establishment of Palestine Potash Ltd. in 1930, later renamed the Dead Sea Works. In 1923, Pinhas Rutenberg was granted an exclusive concession for the production and distribution of electric power. He founded the Palestine Electric Company, later the Israel Electric Corporation. In 1937, there were 86 spinning and weaving factories in Palestine, employing a workforce of 1,500. Capital and technical expertise were supplied by Jewish professionals from Europe. The Ata textile plant in Kiryat Ata, which went on to become an icon of the Israeli textile industry, was established in 1934. The industry underwent rapid development during World War II, when supplies from Europe were cut off and local manufacturers were commissioned for army needs. By 1943, the number of factories had grown to 250, with a workforce of 5,630, and output increased tenfold.
After the establishment of the state
After statehood, priority was given to establishing industries in areas slated for development, among them Lachish, Ashkelon, the Negev and Galilee. The expansion of Israel's textile industry was a consequence of the development of cotton growing as a profitable agricultural branch. By the late 1960s, textiles were one of the largest industrial branches in Israel, second only to the foodstuff industry. Textiles constituted about 12% of industrial exports, becoming the second largest export branch after diamonds. In the 1990s, cheap East Asian labor decreased the profitability of the sector. Much of the work was subcontracted to 400 Israeli Arab sewing shops. As these closed down, Israeli firms, among them Delta, Polgat, Argeman and Kitan, began doing their sewing work in Jordan and Egypt, usually under the QIZ arrangement. In the early 2000s, Israeli companies had 30 plants in Jordan. Israeli exports reached $370 million a year, supplying such retailers and designers as Marks & Spencer, The Gap, Victoria's Secret, Wal-Mart, Sears, Ralph Lauren, Calvin Klein, and Donna Karan.
In its first two decades of existence, Israel's strong commitment to development led to economic growth rates that exceeded 10% annually. The years after the 1973 Yom Kippur War were a lost decade economically, as growth stalled, inflation soared and government expenditures rose significantly. Also worthy of mention is the 1983 Bank stock crisis. By 1984, the economic situation became almost catastrophic with inflation reaching an annual rate close to 450% and projected to reach over 1000% by the end of the following year. However, the successful economic stabilization plan implemented in 1985 and the subsequent introduction of market-oriented structural reforms reinvigorated the economy and paved the way for its rapid growth in the 1990s and became a model for other countries facing similar economic crises.
Two developments have helped to transform Israel's economy since the beginning of the 1990s. The first is waves of Jewish immigration, predominantly from the countries of the former USSR, that has brought over one million new citizens to Israel. These new immigrants, many of them highly educated, now constitute some 16% of Israel's 7.5 million population. The second development benefiting the Israeli economy is the peace process begun at the Madrid conference of October 1991, which led to the signing of accords led to a peace treaty between Israel and Jordan (1994).
Despite the Second Intifada, which cost Israel billions of dollars in economic terms[citation needed], Israel managed to open up new markets to Israeli exporters farther afield, such as in the rapidly growing countries of East Asia.
In the past few years there has been an unprecedented inflow of foreign investment in Israel, as companies that formerly shunned the Israeli market now see its potential contribution to their global strategies. In 2006, foreign investment in Israel totaled $13 billion, according to the Manufacturers Association of Israel. The Financial Times said that 'bombs drop, yet Israel's economy grows'. Moreover, while Israel's total gross external debt is US$84 billion, or approximately 44% of GDP, since 2001 it has become a net lender nation in terms of net external debt (the total value of assets vs. liabilities in debt instruments owed abroad), which as of June 2009 stood at a significant surplus of US$54 billion.
The Israeli economy withstood the late-2000s recession, registering positive GDP growth in 2009 and ending the decade with an unemployment rate lower than that of many western countries.There are several reasons behind this economic resilience, for example, the fact, as stated above, that the country is a net lender rather than a borrower nation and the government and the Bank of Israel's generally conservative macro-economic policies. Two policies in particular can be cited, one is the refusal of the government to succumb to pressure by the banks to appropriate large sums of public money to aid them early in the crisis, thus limiting their risky behavior. The second is the implementation of the recommendations of the Bach'ar commission in the early to mid-2000s which recommended decoupling the banks' depository and investment banking activities, contrary to the then-opposite trend, particularly in the United States, of easing such restrictions which had the effect of encouraging more risk-taking in the financial systems of those countries.
OECD membership
In May 2007, Israel was invited to open accession discussions with the OECD.In May 2010, the OECD voted unanimously to invite Israel to join, despite Palestinian objections. It became a full member on 7 September 2010.
Economy rankings
As of 2010, Israel ranks 17th among of the world's most economically developed nations, according to IMD's World Competitiveness Yearbook rankings. The Israeli economy was ranked as the world's most durable economy in the face of crises, and was also ranked first in the rate research and development center investments.
The Bank of Israel was ranked first among central banks for its efficient functioning, up from the 8th place in 2009. Israel was ranked first also in its supply of skilled manpower.
Israeli companies, particularly in the high-tech area, have enjoyed considerable success raising money on Wall Street and other world financial markets; As of 2010 Israel ranked second among foreign countries in the number of its companies listed on U.S. stock exchanges.
Macro-economic trend
This is a chart of trend of gross domestic product of Israel at market prices estimated by the International Monetary Fund and EconStats with figures in millions of Israeli Shekels. Average wages in 2007 hover around $109–133 per day.
Year Gross Domestic Product Per Capita Income
(as % of USA)
1985 28,437 38.37
1990 106,475 53.15
1995 269,718 64.29
2000 470,732 58.45
2005 553,970 47.45
2007 624,2981
External trade
Israeli exports in 2006
For 2006, Israeli exports grew by 11% to just over $29 billion; the hi-tech sector accounted for $14 billion, a 20% increase from the previous year.
The United States is Israel's largest trading partner; two-way trade totalled some $12.6 billion in 1997. The principal U.S. exports to Israel include computers, integrated circuits, aircraft parts and other defense equipment, wheat, and automobiles. Israel's chief exports to the U.S. include cut diamonds, jewelry, integrated circuits, printing machinery, and telecommunications equipment. The two countries signed a free trade agreement (FTA) in 1985 that progressively eliminated tariffs on most goods traded between the two countries over the following ten years. An agricultural trade accord was signed in November 1996, which addressed the remaining goods not covered in the FTA. Some non-tariff barriers and tariffs on goods remain, however. Israel also has trade and cooperation agreements in place with the European Union and Canada, and is seeking to conclude such agreements with a number of other countries, including Turkey, Jordan and several countries in Eastern Europe.
Until the last decade, Israel's trade with the Arab world was minimal due to the Arab League boycott. Beginning in 1945, Arab nations not only refused to have direct trade with Israel (the primary boycott), but they also refused to do business with any corporation that operated in Israel (secondary boycott), or any corporation that did business with a corporation that did business with Israel (tertiary boycott).
Israel is one of the world's major exporters of military equipment, accounting for 10% of the world total in 2007.
Sectors
Agriculture
Agriculture in Israel
2.8% of the country's GDP is derived from agriculture. Of a total labor force of 2.7 million, 2.6% are employed in agricultural production while 6.3% in services for agriculture.While Israel imports substantial quantities of grain (approximately 80% of local consumption), it is largely self-sufficient in other agricultural products and food stuffs. For centuries, farmers in Israel have grown varieties of citrus fruits such as grapefruit, oranges and lemons. Citrus fruits are still Israel's major agricultural export. In addition, Israel is one of the world's leading greenhouse food exporting countries.
Financial sector
Banking in Israel, Venture capital in Israel, and Tel Aviv Stock Exchange
Israel’s venture capital industry has rapidly developed from the early 1990s, and has about 70 active venture capital funds, of which 14 international VCs with Israeli offices. Israel's thriving venture capital and Business incubator industry played an important role in the booming high-tech sector. In 2008, venture capital investment in Israel, rose 19 percent to $1.9 billion.
Between 1991 and 2000, Israel’s annual venture-capital outlays, nearly all private, rose nearly 60-fold, from $58 million to $3.3 billion; companies launched by Israeli venture funds rose from 100 to 800; and Israel’s information-technology revenues rose from $1.6 billion to $12.5 billion. By 1999, Israel ranked second only to the United States in invested private-equity capital as a share of GDP. And it led the world in the share of its growth attributable to high-tech ventures: 70 percent."
Technology sector
Science and technology in Israel and Silicon Wadi
Science and technology in Israel is one of the country's most developed sectors. The percentage of Israelis engaged in scientific and technological inquiry, and the amount spent on research and development (R&D) in relation to gross domestic product (GDP), is amongst the highest in the world. Israel ranks fourth in the world in scientific activity as measured by the number of scientific publications per million citizens. Israel's percentage of the total number of scientific articles published worldwide is almost 10 times higher than its percentage of the world's population.
Israeli scientists have contributed to the advancement of agriculture, computer sciences, electronics, genetics, medicine, optics, solar energy and various fields of engineering. Israel is home to major players in the high-tech industry and has one of the world's most technologically-literate populations. In 1998, Tel Aviv was named by Newsweek as one of the ten most technologically influential cities in the world.
Energy
As of 2009, Israel relied on external imports for meeting most of its energy needs, spending an amount equivalent to over 5% of its GDP per year on imports of energy products. The transportation sector relies mainly on gasoline and diesel fuel while the majority of electricity production is generated using imported coal. The country possesses negligible reserves of crude oil but does have abundant domestic natural gas resources which were discovered in large quantities starting in 2009, after many decades of previously unsuccessful exploration. A 33 billion cubic meters (BCM) natural gas field is located offshore Ashkelon, however, as of 2009 it is approximately two-thirds exhausted. In 2009, a significant gas find with proven reserves of 184 BCM (247 BCM probable) was located in deep water approximately 90 km west of Haifa as well as a smaller 15 BCM field situated nearer the coastline. Furthermore, results of 3D seismic surveys and test drilling conducted in 2010 confirmed that a 453 BCM natural gas deposit exists in a large underwater geological formation nearby the large gas field already discovered in 2009. (For comparison purposes, the United Kingdom's total proven gas reserves as of 2009 are 343 BCM while Germany's consist of 176 BCM.) In the years 2009-2030, the Israeli market is expected to consume around 250 BCM of natural gas and since proven domestic supplies outstrip this demand, it is expected that some of the gas will be exported abroad when the fields are commercially developed. For competitive reasons, natural gas is also purchased by pipeline from nearby Egypt and in the future potentially in the form of LNG from other countries. The large gas discoveries have confirmed that the Levant basin of the Eastern Mediterranean contains significant quantities of natural gas and, potentially, crude oil. Consequently, additional exploration for oil and gas off Israel's coastline is continuing.
Field Discovered Production Estimated size
Mari-B 2000 2004 1 trillion cubic feet
Tamar 2008 Not in production 8.4 trillion cubic feet
Dalit 2009 Not in production 700 billion cubic feet
Leviathan 2010 Not in production 16 trillion cubic feet
Electricity
As of 2010, the Israel Electric Corporation (IEC), a state-owned enterprise, produces nearly all of the electricity generated in Israel. The IEC has an aggregate installed generating capacity of 11,690 MW, virtually all of it produced from fossil fuels. In 2009 the Company sold 48,947 GWh of electricity. The IEC is in the midst of adding several thousand megawatts of generating capacity due to increased demand, though a debate is currently raging with respect to how much should be generated from new coal-fired versus gas-fired plants, a determination complicated by the fact that some of the company's capital investment decisions predate the recent discoveries of significant reserves of natural gas offshore. In addition, in order to encourage competition in the electricity market, the government of Israel is currently (mid-2010) considering proposals from four private companies to generate up to 3,640 MW of electricity in 11 new sites, most of which would be gas-fired combined cycle power stations.
Fuel Sources of Total Generated Electricity by the IEC in 2009
Coal Fuel oil Natural gas Diesel
64.7% 1.2% 32.6% 1.5%
Solar Energy
Solar power in Israel
Solar power in Israel and the Israeli solar energy industry has a history that dates to the founding of the country. In the 1950s, Levi Yissar developed a solar water heater to help assuage an energy shortage in the new country. By 1967 around one in twenty households heated their water with the sun and 50,000 solar heaters had been sold. With the 1970s oil crisis, Harry Zvi Tabor, the father of Israel's solar industry, developed the prototype solar water heater that is now used in over 90% of Israeli homes. Israeli engineers are on the cutting edge of solar energy technology and its solar companies work on projects around the world.
Industrial sector
Companies of Israel by industry
The Dead Sea Works in Sdom is the world's fourth largest producer and supplier of potash products. The company also produces include magnesium chloride, industrial salts, de-icers, bath salts, table salt, and raw materials for the cosmetic industry.
Diamond industry
Diamond industry in Israel
Israel is one of the world's three major centers for polished diamonds, alongside Belgium and India. Israel's net polished diamond exports in the first quarter of 2010 jumped 55 percent from 2009, to $1.45 billion, after a 37 percent drop in all of 2009 to $3.92 billion.
Telecommunications
Telecommunications in Israel
Tourism
Further information: Tourism in Israel
Tourism is one of Israel's major sources of income, with 2.7 million foreign tourists in 2009. Israel offers a plethora of historical and religious sites, beach resorts, archaeological tourism, heritage tourism and ecotourism. Israel has the highest number of museums per capita in the world. The most popular paid site is Masada.
Income
Comparing incomes of a median household in Israel vs. other countries.
"OECD, PPP conversion rates". Retrieved 2006-01-20. "OECD, PPP conversion rates in Israel". Retrieved 2007-01-25.
| Country | Median household income national currency units | Year | PPP rate (OECD) | Median household income (PPP) |
|---|---|---|---|---|
| Switzerland | (gross) 109,236 CHF, $100,387 | 2008 | 1.68375 | $64,877 |
| Connecticut, US | 64,851 USD | 2009 | 1.00 | $64,851 |
| California, US | 56,134 USD | 2009 | 1.00 | $56,134 |
| Canada | (After tax) 63,900 CAD | 2008 | 1.23 | $51,951 |
| United States | 49,777 USD | 2009 | 1.00 | $49,777 |
| Switzerland | (after taxes and health insurance) 77,580 CHF, $71,296 | 2008 | 1.640256 | $47,297 |
| Australia[ | 66,890 AUD | 2007/2008 | 1.5162805 | $44,115 |
| New Zealand | 63,867 NZD | 2008/2009 | 1.5881895 | $40,214 |
| United Kingdom | 24,700 GBP | 2004 | 0.632 | $39,000 |
| Israel | 107,820 ILS | 2006 | 2.90 | $37,000 |
| Mississippi, US | 35,076 USD | 2009 | 1.00 | $35,076 |
| Ireland | 35,410 EUR | 2005 | 1.02 | $35,000 |
| Scotland, United Kingdom | 21,892 GBP | 2005 | 0.649 | $34,000 |
| Hong Kong | 186,000 HKD | 2005 | 5.96 | $31,000 |
| Singapore | 45,960 SGD | 2005 | 1.55 | $30,000 |
| Annual data 2006 | Historical averages (%) 2002-06 |
|---|---|
| Population (m) - 7.1 | Population growth - 1.8 |
| GDP per head (US$; purchasing power parity) - 27,588 | Real GDP growth - 3.1 |
| Percent of unemployed persons (May 2009) - 8.4% | Inflation - 1.9 |
| Exchange rate (av) NIS:US$ - 3.8 | Current-account balance (% of GDP) - 1.6 |
According to the data published by Ian Fursman 60% of the poor households in Israel are of the Haredi Jews and the Israeli Arabs in which there is a high birth rate and a low participation rate in the labor force. Both Groups together represent 25 - 28% of the Israeli population.
(source:wikipedia)
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