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STATE OF ISRAEL MINISTRY OF FINANCE INTERNATIONAL AFFAIRS DEPARTMENT ECONOMIC HIGHLIGHTS 1st Quarter 2010 Initial Conclusive 2009 Figures Included 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 Q1 2009 Q2 2009 Q3 2009 Q4 GDP (current prices in $B)* 184.1 185.9 45.9 46.1 46.5 47.0 Real GDP Growth Rate (%) 4.0% 0.7% -2.7% 1.3% 3.6% 4.9% -- -- -- -- Criteria GDP per Capita (PPP adjusted)** $28,473 None yet 2.2% -1.1% -4.4% -0.3% 1.7% 2.9% Exports (Goods & Services)** $B* (As Percentage of GDP) 83.3 (45.1%) 73.4 (39.5%) 17.6 (38.4%) 17.6 (38.1%) 18.2 (39.2%) 19.9 (42.3%) Imports (Goods & Services)** $B* (As Percentage of GDP) 81.3 (44.0%) 69.9 (37.6%) 16.9% (36.9%) 17.1 (37.0%) 17.7 (38.0%) 18.2 (38.8%) 6.1% 7.6% 7.6% 7.9% 7.7% 7.4% GDP per Capita Growth Rate (%, 2005 prices) Unemployment Rate (%) *Using a public exchange rate of 1$ = 3.76NIS ** In current prices Source: Ministry of Finance, IMF CONTINUE Main Economic Indicators Criteria 2006 2007 2008 2009 Total Gross Debt (Percentage of GDP) 84.5% 78.3% 77.2% 79.6% Government Expenditure (Percentage of GDP) 44.8% 44.0% 42.9% 42.7% Current Account Surplus (% of GDP) 5.1% 2.9% 0.7% 3.7% Inflation Rate (CPI, end of year) -0.1% 3.4% 3.8% 3.9% 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% 6% 6.4% 6.0% 5.3% 5.1% 5.7% 5.2% 5.2% 4.9% 5% 4.4% 4.0% 4% 3.6% 3.1% 3% 2% 1.3% 0.7% 1% 1.2% 0.0% 0% -1% -2% In recent years, prior to the global economic 3 out of 4 Quarter of 2009 crisis, the Israeli economy experienced high recorded growth, indicating -3% -4% -5% -2.7% growth rates GDP Business GDP a fast recovery from the -4.8% global economic crisis -6% 2005 2006 2007 2008 2009 2009 Q1 2009 Q2 2009 Q3 2009 Q4 CONTINUE Source: Ministry of Finance. GDP Growth Israel compared to Advanced Economies* (Annual rate of change (%), in constant prices) Since 2004, Israel’s growth rate has exceeded the average growth rate of advanced economies. 5.3% 5.10% 5.0% 5.2% 5.1% 4.0% 4.1% 3.2% 3.1% 3.1% 2.6% 2.50% 2.0% 2.1% 1.6% 1.5% 1.0% 1.0% 0.0% -1.0% -0.7% -2.0% Advanced Economies * Israel Growth -3.0% 2002 2003 2004 2005 2006 2007 * Weighted average: US – 39%, Euro area – 46.5%, Japan – 3%, UK – 5%, Asian Newly Industrialized countries – 6.5% Source: Ministry of Finance. 2008 CONTINUE Major GDP Components (Annual rate of change (%), in constant prices) Global Economic Crisis 15.0 16 11.3 8.5 11 6.7 6 3.3 1.8 4.1 4.2 6 3.4 4.3 3.6 3 4.5 2.8 3 1.1 0.8 1 -4 -9 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. -6.5 -12.7 -14 2005 Private Consumption 2006 Government Consumption 2007 Investment in Fixed Assets 2008 2009 Exports of Goods and Services CONTINUE Source: Ministry of Finance Exports of Goods and Services ($B) 90 80 24.1 70 21.1 60 19.2 50 17.4 16 40 13.4 11.9 57.2 30 50.3 43.3 20 10 27.5 30.2 36.7 39.8 0 2002 2003 2004 2005 Goods 2006 2007 2008 Services CONTINUE Source: Ministry of Finance Israel’s Main Trading Partners (US$ Billions, excluding diamonds) 20 18 16 Exports to the U.S. grew in 2009, as imports declined 14 18 11.6 Import Export 12 16 10 14 8 6 12 1.9 11.8 4 1.1 7 10 2 1.6 1.6 2 4 2.5 8 1.6 4.2 2.5 1.8 1.8 1.2 0.8 1.9 2.2 0.2 2008 2.8 0 US A 6 4 1.4 0.9 3.4 3.5 5.4 Ge rm an 1 1.5 2 1.3 * Ne t he rla n It a ly Tu ds rke y UK Fra nc e Ja p an Sw itze rla n d 0.1 1.1 1.1 0.5 1.4 1.4 1.5 2009 2.5 2.1 1.8 y Ch i na 1.5 0 US A Ge rm an y Ch i na * Ne t he Ita rla n ds ly UK Sw itze Tu rla n rke Fra nc e Ja p an d *Since July 1997 the data on trade with Hong-Kong is added to the data on China Source: Central Bureau of Statistics y CONTINUE Net Foreign Investments in Israel (In $ Billion) 18 16.9 Direct Investments 16 14.8 13.8 14 Total Investments 12 9.5 10 9.6 9 8.3 7.8 8 4.9 6 4.3 4.3 3.3 4 2.4 1.7 2 0 2002 2003 2004 2005 2006 2007 2008 CONTINUE Source: Ministry of Finance Unemployment and Participation (As % of Total Labor Force) 8.5% 57.0% 56.7% 56.6% 56.6% 8.0% 56.5% 56.4% 7.9% 56.4% 56.6% 56.5% 7.6% 56.5% 7.5% 7.7% 7.40% 7.0% 6.5% 56.0% 55.5% 6.5% As Israel grows out of the global 6.0% recession, since 2009: 6.1% 6.0% > unemployment is decreasing 5.9% 5.5% 55.0% > participation in labor force is increasing Unemployment Rate Participation in the Labor Force 5.0% 54.5% 2008 Q1 Q2 Q3 Q4 2009 Q1 Q2 Q3 Q4 CONTINUE Source: Ministry of Finance Inflation Rate (Rate of Change in CPI, end of year) 7% 6.5% The Consumer Price Index (CPI) grew by 4.0% during 2009. 6% 5% 4.0% 3.8% 4% 3.4% 2.4% 3% 1.4% 2% 1.2% 1.3% 1% -1.9% -0.1% 0.0% 0% -1% -2% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 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 for 2009, estimated) 7% 2008 (left column) 2009 (right column) The Israeli economy demonstrated a high level of stability compared to other countries throughout the global economic crisis 5% 4.5% 3.8% 4.1% 4.1% 3.8% 3.7% 3.30% 2.6% 3% 2.4% 2.6% 2.33% 1.4% 1% 1% 0.14% -0.40% -1% 0.15% -0.39% -0.58% -1.13% -1.58% el gi um B an y G er m Ire la nd nl an d Fi A U S N or w ay or tu ga l P w it z er la nd S Ja pa n Is ra el -3% CONTINUE Sources: Ministry of Finance, IMF Growth of Main GDP Components for Previous Year Criteria Real GDP Business GDP 2009 + 0.7% 0.0% Exports - 11.8% Private Consumption + 1.6% Public Consumption + 1.5% Investment in Fixed Assets - 6.6% 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% 90% 84.5% 85% 79.9% 78.3% 80% 77.2% 75% 2003 2004 2005 2006 2007 2008 2009 CONTINUE Source: Ministry of Finance Budget Deficit – Target and Execution (In $ Billion) 1.90$B 0.5 0.10$B -0.37$B -0.78$B -1.05$B -1.5 -2.04096$B -2.39840$B -3.5 -3.17$B -4.02$B -4.02$B -5.5 For the first time in its history, Israel enacted a biennial budged for the years 2009-2010 -7.5 In 2009 Israel came in under budget target. -9.5 -9.02$B Budget Execution Budget Target -10.89$B -11.5 Q1 Q2 Q3 Q4 2008 Total Q1 Q2 Q3 Q4 2009 Total CONTINUE Source: Ministry of Finance Budget Deficit and General Government Expenditure 2009 2008 2007 Budget Deficit (% of GDP) 5.10% 2.20% 0.00% 2006 0.90% 2005 2009 42.90% 2008 1.80% 2004 0.00% 42.90% 3.50% 1.00% 2.00% 3.00% 4.00% 44.00% 5.00% 44.80% 45.40% General Government Expenditure (% of GDP) 47.40% 2007 2006 2005 2004 48.00% 47.00% 46.00% 45.00% 44.00% 43.00% 42.00% 41.00% 40.00% CONTINUE Source: Ministry of Finance Current Account Balance and Net Foreign Debt In 2003, the current account balance turned positive accompanied by an decrease of net foreign debt 2003 2004 2005 2006 2007 2008 -24.6% -24.8% 2009 0% -1.8% -5% Current Account Surplus -4.6% -10% (% of GDP) -11.1% -15% -14.9% 5.0% -20% 5.0% -25% 4.0% 3.1% 3.0% 1.2% -27.9% -30% 2.8% 2.3% Net Foreign Debt 2.0% 1% (% of GDP) 1.0% 0.0% 2002 2003 2004 2005 2006 2007 2008 -1.0% -0.8% CONTINUE Source: Ministry of Finance. Gross Tax Burden (as % of GDP) 35.5% 35.6% 35.9% 36.4% 33.8% 31.5% 2004 2005 2006 2007 2008 2009 OECD countries average: 35.8% (2007 average) OECD countries average: 35.2% (2008 average estimated by OECD) NEXT CHAPTER: INTERNATIONAL COMPARISONS Source: Ministry of Finance, OECD BACK TO CONTENTS International Comparisons Central Bank Interest Rates: Israel and U.S.A NASDAQ and Tel-Aviv 100 (monthly average) Global Competitive Index BACK TO CONTENTS Central Bank Interest Rates: Israel and U.S.A 6% 5% The Bank of Israel was the first in the western world to raise interest since the outburst of the economic crisis. 4% The rate was raised gradually from 0.5% to 1.25% 3% 2% Bank of Israel Rate (BOI) 1% U.S. Federal Funds Rate 3 2 1 20 10 11 12 9 10 8 7 6 5 4 3 2 20 1 09 2 1 9 10 11 8 7 6 5 4 3 2 20 1 08 2 1 9 10 11 8 7 6 5 4 0% -1% CONTINUE Source: Bank of Israel (BOI), Federal Reserve NASDAQ & Tel Aviv 100 (monthly average) Nasdaq (left scale) 4,000.00 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 1,500.00 400.00 300.00 Source: Ministry of Finance Ja n2 01 0 20 09 Ju ly Ja n2 00 9 20 08 Ju ly Ja n2 00 8 20 07 Ju ly Ja n2 00 7 Ju l2 00 6 200.00 Ja n2 00 6 Ju l2 00 5 1,000.00 CONTINUE Global Competitiveness Index 2009-2010 The World Economic Forum Ranked Israel 27th Out of 134 Countries CONTINUE Source: World Economic Forum, Global Competitiveness Index, 2009-2010 Global Competitiveness Index 2009/10 (selected categories, rank circled in red) Utility Patents Quality of Scientific Research Institutions Company spending on R&D Strength of Investor Protection CONTINUE Source: World Economic Forum, Global Competitiveness Index, 2009-2010 Global Competitiveness Index 2009/10 (selected categories, rank circled in red) Capacity for Innovation Availability of Latest Technologies Personal Computers Venture Capital Availability NEXT CHAPTER: ISRAEL AND THE OECD Source: World Economic Forum, Global Competitiveness Index, 2009-2010 BACK TO CONTENTS Israel and the OECD Unemployment Rate in 2007-2008 GDP Based on PPP per Capita in 2006 BACK TO CONTENTS Unemployment Rate (harmonized) 20% 2008: Israel stood at the total OECD average 2009: Israel stood below the total OECD average 18.1% 18% During 2009, with the global economic crisis in the background, Israel’s unemployment grew mildly compared with some OECD members. 16% 7.6% 14% 6.1% 12% 11.8% 11.4% 10.1% 9.4% 10% 8% 8.3% 7.6% 6.1% 9.6% 9.3% 7.8% 6.0% 8.2% 7.8% 6.4% 6.0% 5.8% 6% 4.4% 3.6% 3.5% 3.5% 3.2% 2.8% 4% 3.3% 2% 2008 2009 0% d an nl Fi k ar m en D l ga rtu Po nd la er i tz Sw y es at St r ga un d te ni a re s Ko nd rl a he et N H U nd la Ire n ai Sp el ra Is ea ar ro Eu D EC lO ta To Source: Ministry of Finance, OECD CONTINUE GDP per capita based on Purchasing-Power-Parity (PPP), 2008, current prices in US$ 90,000 80,000 70,000 60,000 50,000 27901.8 * 40,000 * 30,000 20,000 * 10,000 0 ey rk Tu o ic ex M d an ol P ry lic ga ub un H ep R k va lo S l ga lic tu ub or ep R P ch ze C ly ea or K el ra Is Ita in pa S ce an Fr y an m er G n om pa gd Ja in K d te ni U d an nl Fi k ar m e n and D al Ze ew N nd la er it z w Source: Ministry of Finance, OECD S nd s la te Ire ta S d te ni U ay w g or ur N bo m xe Lu * Estimated NEXT CHAPTER: INTERNATIONAL TREATIES 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 Finland Netherlands 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 (candidate) 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 (candidate) | 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 Director VISIT OUR WEBSITE: www.financeisrael.mof.gov.il Overseas Economic Information International Affairs Department CONTACT US: Ministry of Finance Jerusalem [email protected] Israel Mr. Assaf Luxembourg Overseas Economic Information International Affairs Department Ministry of Finance Jerusalem Israel START OVER