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STATE OF ISRAEL MINISTRY OF FINANCE INTERNATIONAL AFFAIRS DEPARTMENT ECONOMIC HIGHLIGHTS 3rd Quarter 2010 Click to start Contents Economic Figures Balances International Comparisons Israel and the OECD Note: International Treaties Relevant Sites Contact Us You can return to the beginning of each chapter by clicking the emblem of Israel on the top of each slide. Economic Figures Main Economic Indicators GDP and Business GDP Growth: Israel compared to the World Major GDP Components Exports of Goods and Services Main Trading Partners Foreign Investments Unemployment & Participation Rates Inflation Rate Inflation Rate Worldwide Growth of Main GDP Components 2008 BACK TO CONTENTS Main Economic Indicators 2008 2009 2009 Q3 2009 Q4 2010 Q1 2010 Q2 GDP (current prices in $B)* 185.0 186.4 46.6 47.1 47.5 48.1 Real GDP Growth Rate (%) 4.2% 0.8% 3.9% 4.3% 3.6% 4.7% -- -- -- -- Criteria GDP per Capita (PPP adjusted)** GDP per Capita Growth Rate (%, 2005 prices) 28,393 $ 28,474 $ 2.3% -1.0% 2.0% 2.2% 1.2% 3.0% Exports (Goods & Services)** $B* (As Percentage of GDP) 83.4 (45.1%) 73.6 (39.5%) 18.1 (38.9%) 19.8 (42.1%) 20.1 (42.3%) 20.9 (43.4%) Imports (Goods & Services)** $B* (As Percentage of GDP) 80.9 (43.7%) 69.5 (37.3%) 17.6 (37.7%) 18.3 (38.9%) 19.3 (40.5%) 19.6 (40.9%) 6.1% 7.6% 7.8% 7.3% 7.0% 6.2% Unemployment Rate (%) *Using a public exchange rate of 1$ = 3.78NIS ** In current prices Source: Ministry of Finance, IMF CONTINUE Main Economic Indicators Criteria Total Gross Debt (% of GDP) Government Expenditure (Percentage of GDP) Current Account Surplus (% of GDP) Inflation Rate (CPI, yearly average) 2006 2007 2008 2009 84.5% 78.3% 77.2% 79.6% 44.8% 44.0% 42.9% 42.7% 5.1% 2.9% 0.7% 3.8% 2.1% 0.5% 4.6% 3.3% CONTINUE Source: Ministry of Finance Main Economic Indicators Domestic Bonds Rating Firm Overseas Bonds Term Forecast Rating Long Moody's Rating A1 A1 Stable Standard & Poor's Fitch Short - Long AA- P1 A Stable Short A-1+ Long A+ A-1 A Stable Short - F1 Moody's / S&P & Fitch Aa3/AA- All 3 rating firms have reaffirmed Israel’s rating, without any downgrade, during the global economic crisis in 2009. A1/A+ A2/A A3/A- Baa1/BBB+ Baa2/BBB Baa3/BBB- Moody's 1992 1993 1994 1995 1996 1997 1998 1999 S&P 2000 2001 Fitch 2002 2003 2004 2005 2006 2007 2008 2009 CONTINUE Source: Ministry of Finance GDP and Business GDP Annual rate of change (%), in Constant Prices 8% 7.0% 6.6% 6.0% 7% 5.7% 6% 5.4% 5.1% 5.6% 4.6% 4.5% 5% 4.3% 4.2% 3.9% 4% 4.7% 4.3% 3.6% 3.8% 3% 2% 0.8% 1% 0% 2005 2006 2007 2008 2009 2009 Q3 2009 Q4 2010 Q1 2010 Q2 -1% -2% -3% -4% -0.2% In recent years, prior to the global economic Since Q2 2009, Israel is experiencing crisis, the Israeli economy experienced high constant growth, indicating a fast growth rates recovery from the global economic crisis -5% -6% GDP Business GDP CONTINUE Source: Ministry of Finance. GDP Growth Israel compared to Advanced Economies* (Annual rate of change (%), in constant prices) 5.7% 5.4% 5.6% 5.10% 5.0% 4.6% 4.2% 3.6% 3.2% 3.1% 2.8% 2.50% 2.6% 2.0% 1.6% 1.5% 0.8% 0.5% 0.5% -0.5% -1.5% -2.5% -3.5% 2003 2004 2005 2006 2007 2008 2009 Since 2004, Israel’s growth rate has exceeded the average growth rate of advanced economies. In 2009, as most of the world experienced a decline in GDP, Israel experienced a 0.7% growth in it’s GDP Advanced Economies * Israel Growth -3.20% CONTINUE Source: Ministry of Finance Major GDP Components (Annual rate of change (%), in constant prices) 15.3 Global Economic Crisis 13.6 16 9.3 11 6.7 6 3.3 4.2 4.4 1.7 5.9 3.1 4.3 3 3.1 4.4 5.2 2.1 1.4 2.2 1 2005 2006 2007 2008 2009 -4 -9 -14 In 2009, due to the global economic crisis, Investment in Fixed Assets and Export of Goods and Services contracted severely. However, the strength and resiliency of Israel's economy in a time of crisis is demonstrated by the positive growth of both Private Consumption and Government Consumption during the same period. Private Consumption Government Consumption Investment in Fixed Assets -6 -12.1 Exports of Goods and Services CONTINUE Source: Ministry of Finance Exports of Goods and Services ($B) Global 90 Economic 80 Services 70 Goods Crisis 24.1 21.1 60 21.9 50 17.4 13.3 16 40 13.4 11.9 57.2 30 50.3 43.3 20 36.7 10 27.5 45.8 39.8 30.2 0 2002 2003 *Using a public exchange rate of 1$ = 3.78NIS ** In current prices Source: Ministry of Finance 2004 2005 2006 2007 2008 2009 CONTINUE Israel’s Main Trading Partners (US$ Billions, excluding diamonds) 14 Imports 12 10 5.4 8 2008 25 6 3.5 3.4 Exports 20 2009 2.5 4 7.1 2.1 1.9 1.5 11.8 4.2 2 1.4 1.5 1.4 1.9 1.8 1.8 3.9 2.8 15 2.5 2.5 2.2 0 2008 10 US A Ch i na * Ge rm an y Sw itze rla n It a ly d Ne t he Ja rla n ds pa n Fra UK nc e Tu rke y 2009 11.6 5 1.6 1.4 1.3 1.1 1.0 1.2 2.0 1.9 1.6 1.6 1.6 1.4 0 US A Ne t he rla n ds Ge rm an UK y Tu rke y Ita ly Ind 0.8 1.2 ia Be lgiu m *Since July 1997 the data on trade with Hong-Kong is added to the data on China Source: Central Bureau of Statistics 1.1 1.2 0.7 1.2 Bra zil Fra nc e CONTINUE Israel’s Main Trading Partners (US$ Billions, excluding diamonds) 20 Imports 18 18.7 18.8 16 14 16.3 13.5 12 10 15.6 11.6 10.7 8 6 4 18 16 13.8 5.4 20 07 20 08 20 09 11.8 11.6 10 8 20 06 16.0 12.8 European Union Asia United states 0 18.9 18 14 12 7.1 6.2 2 20 8.9 8.1 10.5 9.8 8.6 Exports 6 6.7 European Union Asia United states 4 2 5.9 0 20 06 20 07 20 08 20 09 CONTINUE Source: Central Bureau of Statistics Net Foreign Investments in Israel (In $ Billion) 25 Direct Investments 19.4 Global Economic Crisis 20 Total Investments 15.3 14.1 15 10.9 10.1 9.5 8.3 10 4.3 5 9.9 8.8 3.3 4.3 3.9 2.4 0 2003 2004 2005 2006 2007 2008 2009 CONTINUE Source: Ministry of Finance Unemployment and Participation (As % of Total Labor Force) 8.5% 57.5% 7.9% 8.0% 56.9% 7.7% 57.0% 56.7% 56.6% 7.5% 56.6% 56.5% 56.4% 7.6% 7.2% 56.6% 56.5% 7.4% 7.0% 56.3% 56.0% 6.5% 6.5% As Israel grows out of the global recession, unemployment is decreasing 6.0% 6.0% 55.5% 6.2% 55.0% 5.5% Unemployment Rate Participation in the Labor Force 5.0% 54.5% Q3 Q4 2009 Q1 Q2 Q3 Q4 2010 Q1 Q2 CONTINUE Source: Ministry of Finance Inflation Rate (Rate of Change in CPI, yearly average) 7% 6% 5.70% 5% 4.60% 4% 3.30% 3% 2.10% 2% 1.30% 1% 0.70% 0.50% 0% 2002 2003 2004 2005 2006 2007 2008 2009 -0.40% -1% CONTINUE * July 2009 index compared to July 2008 Source: Central Bureau of Statistics, Ministry of Finance Inflation Rate Worldwide (Annual rate of change in CPI) 7% The Israeli economy demonstrated a high level of stability compared to other countries throughout the global economic crisis 2008 (left column) 2009 (right column) 5% 4.60% 4.49% 3.77% 3.90% 3.82% 3.30% 3.11% 2.65% 2.75% 3% 2.43% 2.17% 1.60% 1.40% 1% Be lg iu m an y G er m Ire la nd nl an d Fi US A Po rtu ga l -1.38% -0.90% No rw ay -0.32% -0.45% Sw it z er la nd Ja pa n -1% Is ra el 0.08% -0.21% -1.71% -3% CONTINUE Sources: Ministry of Finance, IMF Growth of Main GDP Components for Previous Year Criteria 2009 Real GDP + 0.8% Business GDP - 0.2% Exports - 12.1% Private Consumption + 1.4% Public Consumption + 2.2% Investment in Fixed Assets - 6.0% NEXT CHAPTER: BALANCES Source: Ministry of Finance BACK TO CONTENTS Balances Gross Public Debt Budget Deficit – Target and Execution Budget Deficit and General Government Expenditure Current Account and Net Foreign Debt Gross Tax Burden BACK TO CONTENTS Gross Public Debt (as percentage of GDP) Since 2003, gross public debt has been on a consistent downward trend, only interrupted by the extraordinary circumstances surrounding the 2009 global economic crisis 105% 99.0% 100% 97.4% 93.8% 95% Global 90% Economic 84.5% Crisis 85% 79.6% 78.3% 80% 77.2% 75% 2003 2004 2005 2006 2007 2008 2009 CONTINUE Source: Ministry of Finance Budget Deficit – Target and Execution 2008 Q3 2008 Q4 2008 Total 2009 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Total 2010 Q1 2010 Q2 -3433 -3516 4500 -869 -5500 -4,452 -5,273 -11,450 -13,501 -15500 -15,180 -16,460 -25500 -16,061 For the first time in its history, Israel enacted a biennial budget for the years 2009-2010 In 2009 Israel came in under budget target. -35500 Quarterly Budget Execution Yearly Budget Execution -39,286 Yearly Budget Target -45500 -44,355 CONTINUE Source: Ministry of Finance Budget Deficit and General Government Expenditure 5.2% 2009 2008 2007 Budget Deficit (% of GDP) 2.2% 0.0% 0.9% 2006 2005 42.7% 1.8% 2004 42.9% 3.5% 0% 1% 2% 3% 2009 4% 2008 2007 44.0% 5% 44.8% 2006 45.4% General Government Expenditure (% of GDP) 2005 2004 47.4% 48% 47% 46% 45% 44% 43% 42% 41% 40% CONTINUE Source: Ministry of Finance Current Account Balance and Net Foreign Debt Since 2003, the current account balance is positive, and is accompanied by a decrease of net foreign debt 2003 2004 2005 2006 2007 2008 2009 0% -1.4% -5% -3.7% -10% Current Account Surplus -9.5% (% of GDP) -15% -13.5% -20% -25% 5.1% -23.1% 5.0% -24.2% -27.5% -30% 3.8% 4.0% 3.1% 2.9% 3.0% Net Foreign Debt 2.3% (% of GDP) 2.0% 1.2% 0.7% 1.0% 0.0% 2003 2004 2005 -1.0% Source: Ministry of Finance. 2006 2007 2008 2009 CONTINUE Gross Tax Burden (as % of GDP) 35.5% 35.6% 35.9% 36.4% 33.8% 31.4% 2004 2005 2006 2007 2008 2009 OECD countries average: 35.8% (2007 average) NEXT CHAPTER: INTERNATIONAL COMPARISONS Source: Ministry of Finance, OECD BACK TO CONTENTS International Comparisons IMD World Competitiveness Yearbook WEF Global Competitive Index Central Bank Interest Rates: Israel and U.S.A NASDAQ and Tel-Aviv 100 (monthly average) BACK TO CONTENTS IMD World Competitiveness Yearbook 2010 The Institute for Management Development ranked Israel 17th out of 58 countries for 2010 (Israel was ranked 24th in 2009) CONTINUE Source: International Institute for Management and Development (IMD), World Competitiveness Yearbook 2010 IMD World Competitiveness Yearbook 2010 Israel is at: Israel is at: Resilience of the economy to economic cycles Youth unemployment Central Bank policy Finance skills Skilled labor Entrepreneurship of managers Public and private sector ventures Flexibility and adaptability of people Innovative capacity Scientific research (public and private) Total expenditure on R&D Business expenditure on R&D CONTINUE Source: International Institute for Management and Development (IMD), World Competitiveness Yearbook 2010 IMD World Competitiveness Yearbook 2010 Israel is at: Israel is at: Capital markets (foreign and domestic) Adaptability of government Venture capital Pension funding CONTINUE Source: International Institute for Management and Development (IMD), World Competitiveness Yearbook 2010 WEF Global Competitiveness Index 2010-2011 The World Economic Forum ranked Israel 24th out of 139 countries for 2010-2011 CONTINUE Source: World Economic Forum, Global Competitiveness Index, 2010-2011 WEF Global Competitiveness Index 2010-2011 Quality of scientific research institutions Utility patents per million population Strength of investor protection Availability of latest technologies CONTINUE Source: World Economic Forum, Global Competitiveness Index, 2010-2011 WEF Global Competitiveness Index 2009-2010 Legal rights index Capacity for innovation Nature of competitive advantage Firm-level technology absorption CONTINUE Source: World Economic Forum, Global Competitiveness Index, 2010-2011 Central Bank Interest Rates: Israel and U.S.A 4.5% The Bank of Israel was the first in the western world to raise interest since the outburst of the economic crisis. 4.0% 3.5% The rate was raised gradually from 0.5% to 1.75% 3.0% 2.5% 2.0% 1.75% 1.50% 1.5% 1.50% 1.25% 1.0% Bank of Israel Rate (BOI) 0.5% U.S. Federal Funds Rate 9 8 7 6 5 4 3 2 11 10 9 8 7 6 5 4 3 2 20 12 10 1 -0.5% 20 12 09 1 11 10 9 8 7 6 5 4 3 2 0.0% CONTINUE Source: Bank of Israel (BOI), Federal Reserve NASDAQ & Tel Aviv 100 (monthly average) 4,000.00 Nasdaq (left scale) 1200.00 Tel Aviv 100 (right scale) 1100.00 3,500.00 1000.00 900.00 3,000.00 800.00 2,500.00 700.00 600.00 2,000.00 500.00 Tel Aviv 100 corresponds with the NASDAQ to current events 400.00 1,500.00 300.00 200.00 3 4 5 Ju l2 6 00 6 8 9 10 11 Ja n 12 20 07 2 3 4 Ju 5 ly 20 6 07 8 9 10 11 Ja n 12 20 08 2 3 4 Ju 5 ly 20 6 08 8 9 10 11 Ja n 12 20 09 2 3 4 Ju 5 ly 20 6 09 8 9 10 J a 11 n 12 20 10 2 3 4 5 6 7 8 1,000.00 NEXT CHAPTER: ISRAEL AND THE OECD Source: Ministry of Finance BACK TO CONTENTS Israel and the OECD Israel has been invited as a full member in the OECD on May 10th 2010, and officially joined in May 27th, 2010. Expenditure on R&D Real GDP Growth GDP per Capita Unemployment BACK TO CONTENTS Me xi co e pu b li Gre c e ce Po l and ak R Chi le Tu r ke y So u Ind i a th A fri c a Rus sia n Hun g Fe d ary era tio n Br a zi l New Ital Ze a y l an d Es t oni a Sp a in Ire l a nd Cze C ch R hi na e pu b lic Po r tu g al N L ux or wa y em bo u rg Sl o v en Net h er ia la nd s C Uni ted an a da Ki n g do m Be l gi u m Fra nc e Au s OE tra li a CD tota l Ge rma ny Ice la nd Au s tr Den i a m Uni ted a rk Sta te Sw i tz e s rl a n d Ko r ea Ja p an Fin l an Sw d e de n Isra el Sl o v Expenditure on R&D (selected countries, as percentage of GDP, 2008) Israel is ranked 2.50 Source: OECD 1st of all OECD countries by expenditure on R&D (research & development) as percentage of GDP (4.864 %), demonstrating innovation, development and creativity. 5.00 4.50 4.86 4.00 3.50 3.00 2.28 2.00 1.50 1.00 0.50 0.00 CONTINUE Real GDP Growth (selected countries, annual percentage of change, 2009) While many OECD countries were severely affected by the global economic crisis, Israel still experienced a positive growth, and only a relatively mild decline in its multi-year growth rate. For Israel’s year-on-year graph, see slide no.7 4 2 0.8 0 -2 -4 -3.4 -6 -8 Fi Sl ov en ia nl an I re d la M nd ex i Ic co el H an un d ga r Ja y p Sw an ed U ni en te d I Ki taly ng do Tu m D rke en y m Sl G ov e ark r a m C k R an ze e c h pu y R bli Lu epu c x e bl N mb ic et ou he r rla g n Au ds st ri O EC S a D pai -T n o Be tal lg i U Po um ni te rt ug d St al at F r es an C ce an a G da Sw re itz ec e er la nd C h N N o ile ew rw Ze ay al an Ko d re Is a Au rae st l ra Po lia la nd -10 CONTINUE Source: OECD Tu rk M ey ex ic o Po la Sl H n o v un d ak ga R ry ep ub C P ze o r lic ch t u R g al ep ub lic Ko re a N I s ew ra Ze e l al an G d re ec e It a ly Sp ai n O E Jap CD a -T n ot a Fr l an G ce er m an U ni Be l y te d gium K in gd o Fi m nl a D nd en m a Ic rk el an C d an Au ad a st ra Sw lia ed en A N us et h e tria r la nd Ire s Sw la n i U tze d ni r te lan d S d ta te N s Lu or xe wa m y bo ur g GDP per capita (selected countries, current prices in US$, current PPP’s, 2008) 100000 90000 For Israel’s adjusted PPP GDP Per Capita, see slide no.4 80000 70000 60000 50000 40000 30000 * Estimated Source: OECD 34404.16 27901.77 20000 10000 0 CONTINUE Unemployment Rate (2009, harmonized) 20 Israel stood below the Total OECD Average. 18 16 14 12 Israel’s unemployment grew mildly compared with some OECD members during 2009, with the global economic crisis in background. Currently, Israel’s unemployment is declining to the level of 6.2% 10 7.6 8 8.3 6 4 2 N N o et rw h e ay r la nd s K Sw o itz re a er la n Au d st ria Lu Ja xe p a m n bo u M rg ex Au ico st r Sl alia ov e D ni N en a e m C w Z a rk ze e ch al R an d ep ub l Ic ic el U G a nd ni e te rm d K a ny in gd om Is ra el It Be aly lg iu m Po la Fi nd nl an d C an ad O Sw a E CD e d en U ni To te d tal S ta t Fr es an c G e re e Po ce rt u H g al un ga ry C hi le Sl o v Ire ak la R nd ep ub Tu lic rk ey Sp ai n 0 NEXT CHAPTER: INTERNATIONAL TREATIES Source: Ministry of Finance, OECD BACK TO CONTENTS International treaties Israel’s Free Trade Agreements Avoidance of Double Taxation Agreements Cooperation in Industrial R&D Agreements Protection of Investments Agreements International Organization Memberships BACK TO CONTENTS Israel’s Free Trade Agreements 1985 USA 1992 EFTA 1997 Turkey 1997 Canada QIZ Agreements Egypt (2004) Jordan (1998) 1999 Mexico 2000 European Union (Association Agreement) 2007 MERCOSUR (Argentina, Brazil, Paraguay & Uruguay, not yet in force) CONTINUE Source: Ministry of Finance Avoidance of Double Taxation Agreements Austria Croatia Hungary Belarus Denmark India Belgium Estonia Ireland Brazil Ethiopia Italy Bulgaria Finland Jamaica Canada France Japan China Germany Latvia Czech Republic Greece Lithuania CONTINUE Source: Ministry of Finance Avoidance of Double Taxation Agreements Luxembourg Russia Switzerland Mexico Singapore Thailand Moldova Slovakia Netherlands Norway Slovenia Turkey Philippines South Africa Ukraine Portugal South Korea United kingdom Poland Spain Uzbekistan Romania Sweden U.S.A Vietnam Taiwan Source: Ministry of Finance CONTINUE Cooperation in Industrial R&D Agreements Austria India Sweden Belgium Ireland United kingdom Canada Italy U.S.A China Korea Victoria (Australia) Finland Netherlands Czech Republic France Portugal Germany Singapore Hong Kong Spain CONTINUE Source: Ministry of Finance Protection of Investment Agreements Albania Cyprus India Argentina Czech Republic Kazakhstan Armenia El Salvador Latvia Azerbaijan Estonia Lithuania Belarus Ethiopia Moldova Bulgaria Georgia Mongolia China Guatemala Poland Croatia Germany Romania CONTINUE Source: Ministry of Finance Protection of Investment Agreements Serbia Ukraine Slovakia Uruguay Slovenia Uzbekistan South Africa * South Korea Thailand Turkey Turkmenistan *pending ratification Source: Ministry of Finance CONTINUE Main International Economic Organizations Membership: Israel is a member in leading international economic organizations: •WBG •IMF •WTO •OECD A more detailed list: BIS | BSEC (observer) | CE (observer) | CERN (observer) | EBRD | FAO | IADB | IAEA | WBG – IBRD, IFC, IDA, MIGA | ICAO | ICC | ICCT (signatory) | ICFTU | IFAD | IFRCS (observer) | ILO | IMF | IMO | Interpol | IOC | IOM | ISO | ITU | OAS (observer) | OECD | OPCW (signatory) OSCE (partner) | PCA | UN | UNCTAD | UNECE | UNEP | UNESCO | UNHCR | UNIDO | UPU | WCO | WFP | WHO | WIPO | WMO | WTOO | WTRO | WTO | ICSID NEXT CHAPTER: RELEVANT SITES Source: Ministry of Finance BACK TO CONTENTS Relevant Sites Ministry of Finance International Affairs Website www.financeisrael.mof.gov.il Israeli Government Institutions Ministry of Finance OECD Profile on Israel Bank of Israel (BOI) Central Bureau of Statistics Israeli Government Portal Israel Securities Authority Ministry of Industry, Trade and Labor CONTACT US BACK TO CONTENTS WE WELCOME YOUR FEEDBACK Mr. Roni Hershkovitz Follow us on Twitter Director Overseas Economic Information International Affairs Department Subscribe to our RSS Feeds Ministry of Finance Jerusalem Israel Subscribe to our Newsletters Mr. Assaf Luxembourg Overseas Economic Information Write us an Email International Affairs Department Ministry of Finance Jerusalem Israel Visit our Website START OVER