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The Israeli Economy

The Israeli Economy. The Israeli Economy - 2009 Facts & Figures. GDP ($Billion) 195.8 Population (7/2010, Million) 7.6 GDP per capita (2008, $ PPP) 27,900 Foreign Trade (% of GDP) 67% Total Exports (% of GDP) 35% Unemployment (7/2010) 6.2%

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The Israeli Economy

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  1. The Israeli Economy

  2. The Israeli Economy - 2009 Facts & Figures • GDP ($Billion) 195.8 • Population (7/2010, Million) 7.6 • GDP per capita (2008, $ PPP) 27,900 • Foreign Trade (% of GDP) 67% • Total Exports (% of GDP) 35% • Unemployment (7/2010) 6.2% The Israeli Industry • Share of business sector 21% • Industrial Sales ($Billion) 82.3 • Industrial Exports (% of sales)42.5% • Employees 360K • Main branches: Chemicals, Electronics & Food The Manufacturers' Association of Israel

  3. The Israeli Economy:Before the Global Crisis The Manufacturers' Association of Israel

  4. 5 Years of Rapid Growth in Israeli Economy Source: CBS The Manufacturers' Association of Israel

  5. 5 Years of Rapid Growth in Israeli Industry Source: CBS The Manufacturers' Association of Israel

  6. The Israeli Economy:During the Global Crisis The Manufacturers' Association of Israel

  7. Positive Growth in Israel Vs. Regression in Most Developed Countries 0.7 The Manufacturers' Association of Israel Source: Merrill Lynch

  8. Relatively Moderate Regression in Israeli Industry Source: OECD, CBS & MAI Economic Research Department The Manufacturers' Association of Israel

  9. Economic Policy During the Crisis

  10. Responsible Fiscal PolicyRestrained Government Budgetary DeficitAs Percentage of GDP * Estimate Source: Bank of Israel The Manufacturers' Association of Israel

  11. Relatively Low Government Deficit in Israel Source: Eurostat, Israeli Ministry of Finance The Manufacturers' Association of Israel

  12. Round Table Forum Government Social Partnership Model Employees Employers

  13. Israel Package Deal in 2009/10 Budget • Purpose: Reduce impact of global crisis on the Israeli economy, while Supporting the business sector. • Achievements: • Support for the business sector: • Investment and direct support - $ 550 Million • Increasing state guarantees - $ 1.5 Billion • Increasing Medium-sized businesses fund - $ 325 Million • Increasing Domestic Demand: Potential of $ 1 Billion • Maintaining competitiveness: Preventing price increases - property tax, water, electricity, additional taxation - millions of $. The Manufacturers' Association of Israel

  14. Expanding Monetary PolicyInterest Rates of Central Banks Over the World % Northern Rock Exceptional measures: buying foreign currency & bonds Lehman-Brothers collapse Israel Crisis begins Source: Bank of Israel The Manufacturers' Association of Israel

  15. Additional Economic Measures No need to rescue financial institutions Establishing funds to ease credit crunch Leadership statements : Ensuring public deposits in the banking system A safety net to ensure pension savings The Manufacturers' Association of Israel

  16. The Israeli EconomyStrengths

  17. Independent of Outside Funding A Continuing Current Account Surplus Source: CBS & MAI Economic Research Department The Manufacturers' Association of Israel

  18. Export Oriented Growth in Industry Source: CBS & MAI Economic Research Department The Manufacturers' Association of Israel

  19. Diversion of Trade to Asian Countries Source: CBS & MAI Economic Research Department The Manufacturers' Association of Israel

  20. A High Tech oriented Growth -Most of Industrial growth derived from the High Tech Sector Contribution to Source: CBS & MAI Economic Research Department The Manufacturers' Association of Israel

  21. Relatively Low Household Debt in IsraelHousehold Debt to Disposable Income Ratio Source: Bank of Israel The Manufacturers' Association of Israel

  22. Israel’s Unemployment rate is relatively low Source: Eurostat, BLS, CBS The Manufacturers' Association of Israel

  23. Relatively High Private Saving Rate in Israel Households Net Saving Rate as Percentage of Total Income, 2007 Source: Leumi Bank

  24. The Banking System Conservative & Supervised % Source: Bank of Israel The Manufacturers' Association of Israel

  25. Bank Nonperforming Loans to Total Loans – Low Ratio in Israel Source: IMF The Manufacturers' Association of Israel

  26. Housing Prices - Relatively Moderate Increase Nominal Change in Average Apartment Price, 1997-2007 Source: Psagot Investment House The Manufacturers' Association of Israel

  27. Upgrading International Status • Late 2007 - Early 2008: Raising Israel credit rating by Standard & Poor's, Moody‘sו- Fitch. • May 2010: Israel's admission to the OECD. • May 2010: Updating Israel classification in MSCI index from a developing to a developed country The Manufacturers' Association of Israel

  28. Responsible Fiscal Policy Persistence 60% / (Actual Debt/GDP) X (Annual growth rate in the past 10 years) 2011-2012 Biennial Budget • Increasing certainty and stability - Stimulating growth & investment • Long-term planning - Improving the planning processes in government offices • Reducing Political pressure and streamlining processes. New Formula to Limit Government • Purpose: Reducing Debt/GDP ratio while maintaining an adequate level of public services. • Formula: 60% = Target Debt/GDP Ratio According to Maastricht Treaty    The Manufacturers' Association of Israel

  29. How to Achieve Competitiveness after the Crisis? • Reduction of Corporate Tax • Nurturing Innovation • Increasing Efficiency

  30. Continuous Reduction of Corporate Tax in Israel Source: Israeli Ministry of Finance The Manufacturers' Association of Israel

  31. How to Achieve Competitiveness after the Crisis? • Reduction of Corporate Tax • Nurturing Innovation • Increasing Efficiency

  32. Nurturing Innovation = Israel’s Competitive Edge

  33. World Leadership in Civilian R&D Investments Israel 2008 – 4.7% Source: CBS The Manufacturers' Association of Israel

  34. High Share of ICT in the Business Sector ICT= Information & Communications Technologies, 2006 Source: CBS The Manufacturers' Association of Israel

  35. High Quality of Scientific Research Institutions Source: The Global Competitiveness Report 2010-2011, World Economic Forum The Manufacturers' Association of Israel

  36. Highly Educated Population The Manufacturers' Association of Israel Source: OECD, CBS

  37. How to Achieve Competitiveness after the Crisis? • Reduction of Corporate Tax • Nurturing Innovation • Increasing Efficiency

  38. Continuous Increase in Labor Productivity Source: CBS & MAI Economic Research Department The Manufacturers' Association of Israel

  39. Employment Flexibility During the Crisis Real Decrease in Wages at the Israeli Business Sector Source: CBS & MAI Economic Research Department The Manufacturers' Association of Israel

  40. Employment Flexibility During the Crisis Concentrated vacation Shortened workweek Source: MAI Economic Research Department, Survey - February 2009 The Manufacturers' Association of Israel

  41. How to Achieve Competitiveness after the Crisis? Israeli Economy Main Challenges • Preserving the competitive advantage: R&D, technology, innovation • Encouraging foreign direct investment (Law Changes) • Upgrading the education system • Upgrading infrastructures • Reducing bureaucracy • Encouraging entrepreneurship • Raising employment rate The Manufacturers' Association of Israel

  42. 2010 Forecasts

  43. An Accelerated Growth is Expected in 2010 Source: CBS The Manufacturers' Association of Israel

  44. Export Oriented Growth is expected in Israeli Industry, 2010 * Excluding Diamonds Source: CBS & MAI Economic Research Department The Manufacturers' Association of Israel

  45. Relatively Low Unemployment Rate is Expected in Israel, 2011 Source: IMF & Bank of Israel The Manufacturers' Association of Israel

  46. Israel’s Growth Outlook – Well Above Developed Countries Average Source: IMF, Merrill Lynch, March 2010. The Manufacturers' Association of Israel

  47. Thank you For additional information please contact the Economic Research Department’s staff: Daphna Aviram-Nitzan, Head of Economic Research Department Julie SadehZeltcer, Head of Economics Analysis Section HagitShmariahu, Economist Eddie Parkansky, Economist Tel. 03-5198806 This publication is also available at the MAI site: www.industry.org.il Manufacturers’ Association of Israel

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