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STATE OF ISRAEL MINISTRY OF FINANCE

INTERNATIONAL AFFAIRS DEPARTMENT

ECONOMIC HIGHLIGHTS 4th Quarter 2010


Contents Economic Figures Balances International Comparisons Israel and the OECD International Treaties Relevant Sites Contact Us

Note: 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 Q4

2010 Q1

2010 Q2

2010 Q3

GDP (current prices in $B)*

194.7

196.3

49.6

50.0

50.6

51.1

Real GDP Growth Rate (%)

4.2%

0.8%

4.6%

3.9%

4.5%

3.8%

--

--

--

--

Criteria

GDP per Capita (PPP adjusted)*

28,715 $

GDP per Capita Growth Rate (%, 2005 prices)

28,581$

2.4%

-1.1%

2.5%

2.1%

2.7%

1.9%

Exports (Goods & Services) $B* (As Percentage of GDP)

87.8 (45.1%)

76.9 (39.2%)

20.9 (42.2%)

21.3 (42.6%)

22.0 (43.5%)

21.5 (42.0%)

Imports (Goods & Services) $B* (As Percentage of GDP)

85.2 (43.8%)

73.2 (37.3%)

19.3 (38.9%)

20.2 (40.3%)

20.5 (40.5%)

20.2 (39.6%)

6.1%

7.6%

7.3%

6.9%

6.4%

6.6%

Unemployment Rate (%) *Current Prices, using a public exchange rate of 1$ = 3.59 NIS 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

84.3%

77.8%

77.1%

79.3%

44.7%

43.6%

43.0%

43.0%

5.1%

2.9%

0.8%

3.9%

2.1%

0.5%

4.6%

3.3%

CONTINUE

Source: Ministry of Finance


Main Economic Indicators Rating Firm

Domestic Bonds

Term

Moody's Standard & Poor's Fitch

Rating

Long

A1

Short

-

Long

AA-

Short

A-1+

Long

A+

Short

-

Forecast

Stable

Stable

Stable

Overseas Bonds Rating A1 P1 A A-1 A F1

Moody's / S&P & Fitch

All 3 rating firms have reaffirmed Israel’s rating, without any downgrade, during the global economic crisis in 2009.

Aa3/AA-

A1/A+

A2/A

A3/A-

Baa1/BBB+

Baa2/BBB

Baa3/BBB-

Moody's 1992

S&P

Fitch

1993 1994 1995 1996 1997 1998 1999 2000 2001 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%

7% 6%

5.8%

5.9%

5.7%

5.1%

5.3%

4.9%

5%

4.8%

4.7% 4.6% 4.7%

4.2%

4.5%

3.9%

3.8%

3.9%

4% 3% 2% 0.8% 1%

0.1%

0% -1% -2% -3%

2005

2006

2007

2008

2009

2009 Q4

2010 Q1

2010 Q2

2010 Q3

In recent years, prior to the global economic

Since Q2 2009, Israel is experiencing

crisis, the Israeli economy experienced high

constant positive growth, indicating a

growth rates

recovery from the global economic crisis

-4% fast -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% 5.6%

5.3%

5.1%

4.9%

4.6%

4.2%

3.6%

3.2%

3.0% 2.7%

2.7%

2.6% 1.9% 1.6%

1.5% 0.8%

0.5%

-0.5%

-1.5%

-2.5%

-3.5%

0.2% 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 0.8% growth in it’s GDP Advanced Economies *

Israel Growth

-3.2%

CONTINUE Source:

Ministry of Finance


Major GDP Components (Annual rate of change (%), in constant prices)

20.00%

Global Economic Crisis

14.7%

13.6% 15.00%

9.3% 10.00%

6.3% 4.3%

5.00%

3.2% 1.8% 3.4%

5.9%

3.1%

4.3%

5.9% 3.0%

3.1%

3.9% 2.1%

1.4%

2.2%

0.00% 2005

-5.00%

-10.00%

-15.00%

2006

2007

2008

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

2009

-5.8%

-12.5%

Exports of Goods and Services CONTINUE

Source: Ministry of Finance


Exports of Goods and Services ($B)* Global

90.0

Economic 80.0

Services

70.0

Goods

Crisis 24.1 21.1

60.0

22.0 19.3

50.0

17.4 16.0

40.0 11.9

13.4 57.2

30.0

50.3 43.3

20.0 10.0

27.5

30.2

36.7

45.9

39.8

0.0 2002

* In current prices Source: Ministry of Finance

2003

2004

2005

2006

2007

2008

2009

CONTINUE


Israel’s Main Trading Partners (US$ Billions)

Exports 2008

Imports 2008 2009

2009

* Since July 1997 the data on trade with Hong-Kong is added to the data on China Source: Central Bureau of Statistics

CONTINUE


Israel’s Main Trading Partners (US$ Billions)

Exports

Imports

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 9.5

4.9 3.3

5

1.7

4.3

10

8.8

8.3

10

10.1

25.8

4.3

3.9

2.4

14.7 0 2002

2003

* January-September 2010 Source: Ministry of Finance

2004

2005

2006

2007

2008

2009

2010*

CONTINUE


Unemployment and Participation (As % of Total Labor Force)

8.0%

59.0%

7.7% 58.5%

7.8%

7.5% 7.5%

7.3% 57.8% 6.9%

7.0%

57.5%

57.1% 6.5%

56.9%

56.8%

57.0%

56.8%

6.5%

6.6%

56.9% 56.8%

6.0%

58.0%

As Israel grows out of the global recession, since the 2nd quarter of 2009 unemployment is decreasing, hand in hand with an increase in participation rate since the 1st quarter of 2010.

56.6%

56.5%

6.4%

56.0%

55.5%

5.5% 55.0%

Unemployment Rate Participation in the Labor Force 5.0%

54.5% Q4

2009 Q1

Q2

Q3

Q4

2010 Q1

Q2

Q3 CONTINUE

Source: Ministry of Finance


Inflation Rate (Rate of Change in CPI, yearly average)

5%

4.6%

4%

3.3% 3%

2.7% 2.1%

2%

1.3% 1%

0.7%

0.5%

0% 2003

2004

2005

2006

2007

2008

2009

2010

-0.4% -1%

CONTINUE

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%

4.6%

4.5% 3.7%

3.9%

3.8%

3.3% 3.1%

2.7%

2.7%

3%

2.4%

2.2% 1.6%

1.4%

1%

Be lg iu m

an y G er m

Ire la nd

Fi nl an d

US A

-0.9%

No rw ay

-1.4%

0.0%

-0.3%

Po rtu ga l

-0.5%

Sw it z er la nd

Ja pa n

Is ra el

-1%

0.2%

-1.7%

-3% CONTINUE

Sources: Ministry of Finance, IMF


Growth of Main GDP Components for Previous Year Criteria

2009

Real GDP

+ 0.8%

Business GDP

+ 0.1%

Exports

- 12.5%

Private Consumption

+ 1.4%

Public Consumption

+ 2.2%

Investment in Fixed Assets

- 5.8 %

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

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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 84.3%

Crisis

85%

79.3% 77.8%

80%

77.1%

75% 2003

2004

2005

2006

2007

2008

2009

CONTINUE

Source: Ministry of Finance


Budget Deficit – Target and Execution (in NIS million, Current prices)

2008 Q4

2008 Total

2009 Q1

2009 Q2

2009 Q3

2009 Q4

2009 Total

2010 Q1

2010 Q2

Q3

4500

-5500

-3433

-4,452

-5,273

-3579 -6523

-11,450 -13,501

-15500 -16,460

-25500

-15,180

-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 2009

5.2%

2008 2007

2.2% 0.0%

2006

General Government Expenditure (% of GDP)

0.9%

2005

1.8%

2004

3.5%

0%

1%

2%

3%

4%

5%

43.0%

2009

43.0%

2008

43.6%

Budget Deficit (% of GDP)

2007

44.7%

2006

45.3%

2005

47.3% 48%

2004 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 30%

26.1% 25%

23.1%

23.2%

2007

2008

20%

Current Account Surplus

14.2%

15%

)(% of GDP

10.6% 10% 5%

5.1% 5.0%

4.4% 1.7%

0%

3.9%

4.0%

3.1%

2.9%

3.0%

2003

2004

2005

2006

2009

*Net Foreign Surplus

2.3%

)of GDP(%

2.0%

1.2% 0.8%

1.0% 0.0% 2003

2004

2005

2006

2007

2008

-1.0%

*Current Prices, using a public exchange rate of 1$ = 3.59 NIS Source: Ministry of Finance.

2009 CONTINUE


Gross Tax Burden (as % of GDP)

35.5%

35.6%

35.8%

36.1%

33.8%

31.3%

2004

2005

2006

2007

2008

2009

)OECD countries average: 34.8% (2008 average

NEXT CHAPTER: INTERNATIONAL COMPARISONS

Source: Ministry of Finance, OECD

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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)

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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) Source: International Institute for Management and Development (IMD), World Competitiveness Yearbook 2010

CONTINUE


IMD World Competitiveness Yearbook 2010 Resilience of the economy

Central bank policy

Financial skills

Entrepreneurship

CONTINUE

Source: International Institute for Management and Development (IMD), World Competitiveness Yearbook 2010


IMD World Competitiveness Yearbook 2010 Venture capital

Total expenditure on R&D

Scientific research

Skilled labor

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 The Bank of Israel was the first in the western world to raise interest since the outburst of the economic crisis. The rate was raised gradually from 0.5% to 2%

Bank of Israel Rate (BOI) U.S. Federal Funds Rate

CONTINUE

Source: Bank of Israel (BOI), Federal


NASDAQ & Tel Aviv 100 (monthly average)

4,000.00

1200.00 1100.00

3,500.00

1000.00 900.00

3,000.00

800.00 2,500.00

700.00 600.00

2,000.00

1,500.00

500.00

Tel Aviv 100 corresponds with the NASDAQ to current events

400.00

Nasdaq (left scale)

300.00

Tel Aviv 100 (right scale) 200.00

3 4 5 Ju l2 6 00 6 8 9 10 J a 11 n 12 20 07 2 3 4 Ju 5 ly 20 6 07 8 9 10 Ja 11 n 1 20 2 08 2 3 4 Ju 5 ly 20 6 08 8 9 10 J a 11 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 9 10 11

1,000.00

NEXT CHAPTER: ISRAEL AND THE OECD

Source: Ministry of Finance

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Israel and the OECD

Israel was invited to join the OECD on May 10, 2010, and officially joined on May 27, 2010.

Expenditure on R&D Real GDP Growth GDP per Capita Unemployment

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ak Mex Re i co pu b Gr li c ee Po ce lan d Ch i Tu le rke So Ind y uth i a Ru Af ss ian Hun ri ca Fe g a de ry rat ion Br azi Ne l w I Ze tal y al a n Es d ton i Sp a ain Ire lan Cz ec C d h R hi n ep a u Po blic rtu g N Lu or al x e wa mb y o Sl o ur g Ne v e the nia rl Un C and s i te an d K ad i ng a do Be m lgi Fra um Au nc e OE stra CD li a Ge total rm a Ice n y lan Au d s Un Denm tri a i te a d rk Sw State i tz s erl an Ko d re Ja a p Fin an Sw l and ed en Isr ae l

Sl o v

Expenditure on R&D (as percentage of GDP, 2008)

Israel is ranked development)

5.00

2.50

Source: OECD

1st of all OECD countries by expenditure on R&D (research &

as percentage of GDP (4.864 %), demonstrating innovation, development and creativity. 4.86

4.50

4.00

3.50

3.00

2.28

2.00

1.50

1.00

0.50

0.00

CONTINUE


I Po tal y rt ug Ne a J w ap l Ze an a De land nm Un F ark i te ran d ce St a Hu te s n U ni C gar te a y d n K ad O i ng a EC do D m t Sw o ta e l Be d en l G giu er m m a No ny rw Ir e ay lan Sw S d i t pa Ne z er i n t h l an er d la n A ds us Au tri st a r M al i a ex F i i co nl a G nd re e Lu Ic e c e xe l a m nd bo ur T ur g ke Ko y re Ch a i So Es l e ut ton h ia A fr i ca I sr Cz ae ec h Bra l R z ep i l S ubli lo c In ve n Ru do ia ss ne ia n Po si a Sl Fe l ov d an e d a k R rat ep i on ub l ic In di Ch a in a

Real GDP Growth (3-year average at end of period)

Israel’s 3-year average growth rate is higher then most OECD members.

For Israel’s year-on-year graph, see slide no.7

12

9

6 4.83

3 2.13

0

-3

CONTINUE

Source: OECD


Ind Indi on a es So C i a h uth i n Af a r ic Br a a T u zil rke y Ch Me i l e x Po ico l Hu and n Sl ov E gary a k st R e oni p a Cz P ubl ec or ic h tu Ne Rep gal w ub Ze li c a la n Ko d r S l ea ov en ia Isr Gr ael ee ce Ita l Sp y ai OE F ra n n CD ce to t Ja al p B e an Un G l giu i te erm m dK a i ng ny d F in o m Sw l and e De d en nm Ice ark la Au nd Au s tri s tr a al i Ne Can a t h ad erl a an Sw Ir el ds a Un i tze n d r i te l a d S nd ta Lu Nor tes xe wa mb y ou rg

GDP per capita

(current prices in US$, current PPP’s, 2008)

For Israel’s adjusted PPP GDP Per Capita, see slide no.4

60 000

50 000

40 000 33 732

30 000

* Estimated Source: OECD 27 902

20 000

10 000

0

CONTINUE


Ic el a No nd Ne r w t h ay er la nd Sw Ko s i tz r e er a l De and nm Ne M ark w exi Ze co al an d Ja pa Au n Au stri a Lu st xe ra Un mb l i a i te ou d rg St at Ir e es Sl lan ov d en Un E ite s ia Cz d K ton ec i ng i a h do Re m O p ub EC li D c to Ca tal n Sw ada Ru ed ss en ia n Fe Ita d e ly ra t F in i on la nd Is Hu rael ng ar Ch y Be i l e lg Po iu m r tu ga Br l a G zi l re e F r ce an Ge ce rm a T u ny rk ey S p Sl ov P ai n ak o R l an ep d ub l ic

Unemployment Rate (Average 2006-2008 or latest available period)

Israel’s unemployment grew mildly compared with some OECD members during 2009, with the global economic crisis in background.

12

For Israel’s unemployment, see slide no.14

10

8 7.27

6 6.00

4

2

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

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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 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

Taiwan

Mexico

Singapore

Thailand

Moldova

Slovakia

Vietnam

Norway

Slovenia

Turkey

Netherlands

South Africa

Ukraine

Philippines

South Korea

United kingdom

Portugal

Spain

Uzbekistan

Poland

Sweden

U.S.A

Romania

Switzerland

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

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Relevant Sites

Ministry of Finance Bank of Israel (BOI) Central Bureau of Statistics (CBS) Israeli Government Portal Israel Securities Authority Ministry of Industry, Trade and Labor

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