Israel's strong commitment to economic development and its talented work force led to economic growth rates during the nation's first 2 decades that frequently exceeded 10% annually. The years after the 1973 Yom Kippur War were a lost decade economically, as growth stalled and inflation reached triple-digit levels. 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 rapid growth in the 1990s.
A wave of Jewish immigration beginning in 1989, predominantly from the countries of the former U.S.S.R., brought nearly a million new citizens to Israel. These new immigrants, many of them highly educated, now constitute some 13% of Israel's 7.5 million inhabitants. Their successful absorption into Israeli society and its labor force forms a remarkable chapter in Israeli history. The skills brought by the new immigrants and their added demand as consumers gave the Israeli economy a strong upward push and in the 1990s, they played a key role in the ongoing development of Israel's high-tech sector.
During the 1990s, progress in the Middle East peace process, beginning with the Madrid Conference of 1991, helped to reduce Israel's economic isolation from its neighbors and opened up new markets to Israeli exporters farther afield. The peace process stimulated an unprecedented inflow of foreign investment in Israel, and provided a substantial boost to economic growth in the region over the last decade. The onset of the intifada beginning at the end of September of 2000, the downturn in the high-tech sector and NASDAQ crisis, and the slowdown of the global economy have all significantly affected the Israeli economy. However, despite the conflicts in Gaza and Lebanon, the Israeli economy grew during 2006.
Israeli companies, particularly in the high-tech area, have in the past enjoyed considerable success raising money on Wall Street and other world financial markets; Israel has approximately the same number of companies listed on NASDAQ as the next three countries (Canada, Japan, and Ireland) combined. Israel's tech market is very developed, and in spite of the pause in the industry's growth, the high-tech sector is likely to be the major driver of the Israeli economy. Almost 45% of Israel's exports are high tech. Most leading players, including Intel, Motorola, IBM, and Cisco have a presence in Israel.
After growing by an exceptional 9.2% in 2000, growth was negative in 2001 and 2002, as a result of the security situation, global recession, and high-tech downturn. Growth returned in 2003, and as a result of the improvement in the security situation and the economic recovery plan undertaken by the Government of Israel, the Israeli economy grew by an average of more than 5% per year from 2004 to 2007. This was followed by growth of 4.2% in 2008. With the onset of the global financial crisis, the slowdown in the Israeli economy only began in the third quarter of 2008, but had largely recovered by the third quarter of 2009. Unemployment reached a high of 10.7% in 2003, a level not seen in 20 years, and declined consistently each year until 2008, when it reached 6.1%, the lowest level since 1995. The global economic slowdown raised the 2009 unemployment rate to 7.6%.
Trade of goods and services in Israel grew by 9.3% and 5.2%, respectively, in 2006 and 2007. Exports declined by a sharp 35.6% in the fourth quarter of 2008 and 28.6% in the first quarter of 2009. Diamond exports alone declined by more than 36% in the fourth quarter of 2008 compared with the same quarter the previous year. Agricultural exports, which increased by 44% in 2007, declined by almost 12% in the fourth quarter of 2008. However, recovery was well underway by early 2010, with exports posting 15.8% growth in the second quarter while imports were up 8.3%.
The general consensus among economists is that Israel entered the global economic crisis in relatively good shape. Because the Government of Israel maintained conservative policies during the crisis and avoided ambitious fiscal spending packages, the Israeli economy is expected to quickly emerge from a shallow recession and return to a path of growth, even if not at levels that were seen prior to the crisis.
The United States is Israel's largest single trading partner. In 2009, bilateral trade totaled $22.3 billion, a decline of about 20% over 2008, victim of the slowdown in global trade. The U.S. trade deficit with Israel was $11.1 billion in 2009. The principal goods exported from the U.S. include civilian aircraft parts, telecommunications equipment, semiconductors, civilian aircraft, electrical apparatus, and computer accessories. Israel's chief exports to the U.S. include diamonds, pharmaceutical preparations, telecommunications equipment, medicinal equipment, electrical apparatus, and cotton apparel. 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 10 years. An agricultural trade accord signed in November 1996 addressed the remaining goods not covered in the FTA but has not entirely erased barriers to trade in the agricultural sector. Israel also has trade and cooperation agreements in place with the European Union, Canada, Mexico, and other countries.
Best prospect industry sectors in Israel for U.S. exporters are energy; defense; security and safety; health care; industrial chemicals; information and telecommunications; electronics; building and construction; travel and tourism; and education.
Nominal GDP (2009 est.): $195 billion.
Annual real growth rate (2009): 0.8%.
Per capita GDP (2009): $26,178.
Currency: Shekel (3.82 shekels = 1 U.S. dollar; 2009 est.).
Natural resources: Copper, phosphate, bromide, potash, clay, sand, sulfur, bitumen, manganese.
Agriculture: Products--citrus and other fruits, vegetables, beef, dairy, and poultry products.
Industry: Types--high-technology projects (including aviation, communications, computer-aided design and manufactures, medical electronics, fiber optics), wood and paper products, potash and phosphates, food, beverages, tobacco, caustic soda, cement, construction, plastics, chemical products, diamond cutting and polishing, metal products, textiles, and footwear.
Trade: Exports (2009 est.)--$50.015 billion. Exports include polished diamonds, electronic communication, medical and scientific equipment, chemicals and chemical products, electronic components and computers, machinery and equipment, transport equipment, rubber, plastics, and textiles. Imports (excluding defense imports, 2009 est.)--$55.2 billion: raw materials, diamonds, energy ships and airplanes, machinery, equipment, land transportation equipment for investment, and consumer goods. Major partners--U.S., U.K., Germany; exports--U.S., Belgium, Hong Kong; imports--U.S., Belgium, Germany, Switzerland, U.K.
1Including Jerusalem
2Israel proclaimed Jerusalem as its capital in 1950. The United States, like nearly all other countries, maintains its embassy in Tel Aviv.
Last updated on January 12, 2011
Economy - overview:
Israel has a technologically advanced market economy. It depends on imports of crude oil, grains, raw materials, and military equipment. Despite limited natural resources, Israel has intensively developed its agricultural and industrial sectors over the past 20 years. Cut diamonds, high-technology equipment, and agricultural products (fruits and vegetables) are the leading exports. Israel usually posts sizable trade deficits, which are covered by large transfer payments from abroad and by foreign loans. Roughly half of the government's external debt is owed to the US, its major source of economic and military aid. Israel's GDP, after contracting slightly in 2001 and 2002 due to the Palestinian conflict and troubles in the high-technology sector, grew about 5% per year from 2004-07. The global financial crisis of 2008-09 spurred a brief recession in Israel, but the country entered the crisis with solid fundamentals - following years of prudent fiscal policy and a series of liberalizing reforms - and a resilient banking sector, and the economy has shown signs of an early recovery. Following GDP growth of 4% in 2008, Israel's GDP slipped to 0.2% in 2009, but reached 3.4% in 2010, as exports rebounded. The global economic downturn affected Israel's economy primarily through reduced demand for Israel's exports in the United States and EU, Israel's top trading partners. Exports account for about 25% of the country's GDP. The Israeli Government responded to the recession by implementing a modest fiscal stimulus package and an aggressive expansionary monetary policy - including cutting interest rates to record lows, purchasing government bonds, and intervening in the foreign currency market. The Bank of Israel began raising interest rates in the summer of 2009 when inflation rose above the upper end of the Bank's target and the economy began to show signs of recovery.
GDP (purchasing power parity):
$217.1 billion (2010 est.)
country comparison to the world: 51
$210 billion (2009 est.)
$209.6 billion (2008 est.)
note: data are in 2010 US dollars
[see also: GDP (purchasing power parity) country ranks ]
GDP (official exchange rate):
$201.3 billion (2009 est.)
[see also: GDP (official exchange rate) country ranks ]
GDP - real growth rate:
3.4% (2010 est.)
country comparison to the world: 103
0.2% (2009 est.)
4.4% (2008 est.)
[see also: GDP - real growth rate country ranks ]
GDP - per capita:
$29,500 (2010 est.)
country comparison to the world: 47
$29,000 (2009 est.)
$29,500 (2008 est.)
note: data are in 2010 US dollars
[see also: GDP - per capita country ranks ]
GDP - composition by sector:
agriculture: 2.4%
[see also: GDP - composition by sector - agriculture country ranks ]
industry: 32.6%
[see also: GDP - composition by sector - industry country ranks ]
services: 65% (2009 est.)
[see also: GDP - composition by sector - services country ranks ]
Labor force:
3.08 million (2009 est.)
country comparison to the world: 102
[see also: Labor force country ranks ]
Labor force - by occupation:
agriculture: 2%
[see also: Labor force - by occupation - agriculture country ranks ]
industry: 16%
[see also: Labor force - by occupation - industry country ranks ]
services: 82% (September 2008)
[see also: Labor force - by occupation - services country ranks ]
Unemployment rate:
6.4% (2010 est.)
country comparison to the world: 60
7.6% (2009 est.)
[see also: Unemployment rate country ranks ]
Population below poverty line:
23.6%
note: Israel's poverty line is $7.30 per person per day (2007)
[see also: Population below poverty line country ranks ]
Household income or consumption by percentage share:
lowest 10%: 2.5%
[see also: Household income or consumption by percentage share - lowest 10% country ranks ]
highest 10%: 24.3% (2008)
[see also: Household income or consumption by percentage share - highest 10% country ranks ]
Distribution of family income - Gini index:
39.2 (2008)
country comparison to the world: 67
35.5 (2001)
[see also: Distribution of family income - Gini index country ranks ]
Investment (gross fixed):
16.7% of GDP (2009 est.)
country comparison to the world: 120
[see also: Investment (gross fixed) country ranks ]
Budget:
revenues: $60.59 billion
[see also: Budget - revenues country ranks ]
expenditures: $68.68 billion (2009 est.)
[see also: Budget - expenditures country ranks ]
Public debt:
77.3% of GDP (2010 est.)
country comparison to the world: 20
77.7% of GDP (2009 est.)
[see also: Public debt country ranks ]
Inflation rate (consumer prices):
2.6% (2010 est.)
country comparison to the world: 80
3.3% (2009 est.)
[see also: Inflation rate (consumer prices) country ranks ]
Central bank discount rate:
1% (31 December 2009)
country comparison to the world: 130
2.5% (31 December 2008)
[see also: Central bank discount rate country ranks ]
Commercial bank prime lending rate:
3.73% (31 December 2009 est.)
country comparison to the world: 137
6.06% (31 December 2008 est.)
[see also: Commercial bank prime lending rate country ranks ]
Stock of narrow money:
$27.58 billion (31 December 2010 est)
$25.16 billion (31 December 2009 est)
[see also: Stock of narrow money country ranks ]
Stock of broad money:
$208.8 billion (31 December 2009 est.)
$195.7 billion (31 December 2008 est.)
[see also: Stock of broad money country ranks ]
Stock of domestic credit:
$169.9 billion (31 December 2010 est.)
country comparison to the world: 40
$148.5 billion (31 December 2009 est.)
[see also: Stock of domestic credit country ranks ]
Market value of publicly traded shares:
$182.1 billion (31 December 2009)
country comparison to the world: 29
$134.5 billion (31 December 2008)
$236.4 billion (31 December 2007)
[see also: Market value of publicly traded shares country ranks ]
Agriculture - products:
citrus, vegetables, cotton; beef, poultry, dairy products
Industries:
high-technology products (including aviation, communications, computer-aided design and manufactures, medical electronics, fiber optics), wood and paper products, potash and phosphates, food, beverages, and tobacco, caustic soda, cement, construction, metals products, chemical products, plastics, diamond cutting, textiles, footwear
Industrial production growth rate:
5.7% (2009 est.)
country comparison to the world: 58
[see also: Industrial production growth rate country ranks ]
Electricity - production:
54.5 billion kWh (2008 est.)
country comparison to the world: 46
[see also: Electricity - production country ranks ]
Electricity - consumption:
46.38 billion kWh (2007 est.)
country comparison to the world: 48
[see also: Electricity - consumption country ranks ]
Electricity - exports:
2.081 billion kWh (2007)
[see also: Electricity - exports country ranks ]
Electricity - imports:
0 kWh (2008)
[see also: Electricity - imports country ranks ]
Oil - production:
3,806 bbl/day (2009 est.)
country comparison to the world: 99
[see also: Oil - production country ranks ]
Oil - consumption:
231,000 bbl/day (2009 est.)
country comparison to the world: 52
[see also: Oil - consumption country ranks ]
Oil - exports:
69,580 bbl/day (2007 est.)
country comparison to the world: 74
[see also: Oil - exports country ranks ]
Oil - imports:
318,900 bbl/day (2007 est.)
country comparison to the world: 34
[see also: Oil - imports country ranks ]
Oil - proved reserves:
1.94 million bbl (1 January 2010 est.)
country comparison to the world: 95
[see also: Oil - proved reserves country ranks ]
Natural gas - production:
1.19 billion cu m (2008 est.)
country comparison to the world: 62
[see also: Natural gas - production country ranks ]
Natural gas - consumption:
1.19 billion cu m (2008 est.)
country comparison to the world: 88
[see also: Natural gas - consumption country ranks ]
Natural gas - exports:
0 cu m (2008 est.)
country comparison to the world: 167
[see also: Natural gas - exports country ranks ]
Natural gas - imports:
0 cu m (2008 est.)
country comparison to the world: 160
[see also: Natural gas - imports country ranks ]
Natural gas - proved reserves:
30.44 billion cu m (1 January 2010 est.)
country comparison to the world: 70
[see also: Natural gas - proved reserves country ranks ]
Current account balance:
$6.269 billion (2010 est.)
country comparison to the world: 30
$7.637 billion (2009 est.)
[see also: Current account balance country ranks ]
Exports:
$54.31 billion (2010 est.)
country comparison to the world: 49
$45.9 billion (2009 est.)
[see also: Exports country ranks ]
Exports - commodities:
machinery and equipment, software, cut diamonds, agricultural products, chemicals, textiles and apparel
Exports - partners:
US 35.05%, Hong Kong 6.02%, Belgium 4.95% (2009)
Imports:
$55.6 billion (2010 est.)
country comparison to the world: 45
$45.99 billion (2009 est.)
[see also: Imports country ranks ]
Imports - commodities:
raw materials, military equipment, investment goods, rough diamonds, fuels, grain, consumer goods
Imports - partners:
US 12.35%, China 7.43%, Germany 7.1%, Switzerland 6.94%, Belgium 5.42%, Italy 4.49%, UK 4.03%, Netherlands 3.98% (2009)
Reserves of foreign exchange and gold:
$66.98 billion (31 December 2010 est.)
country comparison to the world: 19
$60.61 billion (31 December 2009 est.)
[see also: Reserves of foreign exchange and gold country ranks ]
Debt - external:
$89.68 billion (31 December 2010 est.)
country comparison to the world: 38
$86.78 billion (31 December 2009 est.)
[see also: Debt - external country ranks ]
Stock of direct foreign investment - at home:
$64.82 billion (31 December 2010 est.)
country comparison to the world: 50
$58.82 billion (31 December 2009 est.)
[see also: Stock of direct foreign investment - at home country ranks ]
Stock of direct foreign investment - abroad:
$58.42 billion (31 December 2010 est.)
country comparison to the world: 30
$55.02 billion (31 December 2009 est.)
[see also: Stock of direct foreign investment - abroad country ranks ]
Exchange rates:
new Israeli shekels (ILS) per US dollar - 3.7461 (2010), 3.9326 (2009), 3.588 (2008), 4.14 (2007), 4.4565 (2006)
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