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TRENDS IN THE ISRAELI ECONOMY ECONOMICS AND RESEARCH DEPARTMENT THE MINISTRY OF FINANCE JUNE 2009

TRENDS IN THE ISRAELI ECONOMY ECONOMICS AND RESEARCH DEPARTMENT THE MINISTRY OF FINANCE JUNE 2009. For comments and questions: eldadsh@mof.gov.il. TRENDS IN THE ISRAELI ECONOMY. IMPLICATIONS OF THE GLOBAL CRISIS FOR THE ISRAELI ECONOMY THE DEVELOPMENT OF THE GDP

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TRENDS IN THE ISRAELI ECONOMY ECONOMICS AND RESEARCH DEPARTMENT THE MINISTRY OF FINANCE JUNE 2009

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  1. TRENDS IN THE ISRAELI ECONOMY ECONOMICS AND RESEARCH DEPARTMENT THE MINISTRY OF FINANCE JUNE 2009 For comments and questions: eldadsh@mof.gov.il

  2. TRENDS IN THE ISRAELI ECONOMY • IMPLICATIONS OF THE GLOBAL CRISIS FOR THE ISRAELI ECONOMY • THE DEVELOPMENT OF THE GDP • FOREIGN TRADE AND THE BALANCE OF PAYMENTS • THE LABOR MARKET • THE CAPITAL MARKET • FISCAL POLICY • MONETARY POLICY AND THE RATE OF INFLATION

  3. IMPLICATIONS OF THE GLOBAL CRISIS FOR THE ISRAELI ECONOMY • Following five successive years of rapid growth, a downturn occurred as the Israeli economy underwent a slowdown and subsequently contracted, as a result of the worsening of the global economic crisis. • The growth of the economy and the features of that growth in the last few years have placed the Israeli economy in a good position to cope with the crisis: • In the last few years there has been a surplus in the current account in the balance of payments • A substantial improvement has occurred in the fiscalposition: • A significant fall in the debt-to-GDP Ratio • Low budget deficits in the last few years • A significant improvement has occurred in the labor market: • Low unemployment rate at the eruption of the crisis • A consistent increase in the participation rate

  4. IMPLICATIONS OF THE GLOBAL CRISIS FOR THE ISRAELI ECONOMY • Correspondingly, the financial system is stable in comparison to other developed countries: • The banking system is stable • No complex high-risk products have been developed in the Israeli capital market • No bubble has developed in the prices of real estate • Households have a relatively high rate of saving • The Bank of Israel has increased the foreign-exchange reserves at its disposal to a significant degree • On the down side, weakness exists in the non-bank credit market

  5. IMPLICATIONS OF THE GLOBAL CRISIS FOR THE ISRAELI ECONOMY • The effect of the global crisis on the Israeli economy became more acute in the second half of 2008 and was reflected in the following developments : • A contraction of exports due to the fall in global demand. • A decline in private consumption, which was affected by the sharp falls in the capital markets (due to the adverse impact on the public's wealth) and by the weakness in the labor market. • A worsening of the difficulty in raising credit from banks and, to a higher degree, in the capital market. • A substantial weakening in the labor market: the rate of unemployment rose significantly.

  6. THE INTERACTION BETWEEN THE GLOBAL FINANCIAL CRISIS AND THE REAL ECONOMY IN ISRAEL The Financial Crisis The Real Economy Crisis Slowdown in the real economy (unemployment, production and investment) Asset values drop in the financial sector Global financial crisis Credit crunch Lower private consumption Negative wealth effect Rising uncertainty Lower demand for exports and foreign investment

  7. TRENDS IN THE ISRAELI ECONOMY • IMPLICATIONS OF THE GLOBAL CRISIS FOR THE ISRAELI ECONOMY • THE DEVELOPMENT OF GDP • FOREIGN TRADE AND THE BALANCE OF PAYMENTS • THE LABOR MARKET • THE CAPITAL MARKET • FISCAL POLICY • MONETARY POLICY AND THE RATE OF INFLATION

  8. THE DEVELOPMENT OF GDP • THE RATE OF GROWTH IN ISRAEL • THE COMPONENTS OF GDP • DEVELOPMENTS IN SECTORS OF THE ECONOMY

  9. Growth of the GDP & the Business-Sector GDP * Quarterly – S.A., Annual rate In 2004-2007 the economy grew at an annual rate of more than 5 percent. The growth was fuelled by growth in the business sector and was reflected in an increase of most of the GDP components. Various factors contributed to the acceleration of growth in these years, including the global economic recovery, which was reflected in the expansion of world trade and of activity in the technological sectors; the reforms implemented in the Israeli economy; the decrease in uncertainty and the increasing credibility as a result of the adoption of a stable fiscal policy; and a less restraining monetary policy. Following five years of rapid growth, a downturn was recorded in mid-2008 and the Israeli economy slowed down as the global economic crisis worsened. The effect of the crisis on the Israeli economy caused an abrupt fall in exports, a weakening of the capital market and a sharp increase in uncertainty. Towards the end of the year the slowdown also started to make its mark in the labor market, with a rise in the unemployment rate. In the fourth quarter of 2008 a contraction occurred in economic activity which continued at an accelerated rate in the first quarter of 2009.

  10. GDP per Capita GrowthAnnual Percent Change Average 1987-2000: 2.5% Average 2004-2007:3.3% Average 2001-2003: -1.7% GDP per capita, an indicator of the standard of living, fell in 2001-2003 at an aggregate rate of approximately 5%. In 2004-2007, GDP per capita rose at a rapid rate of 3.3 percent on annual average. The rate of growth in GDP per capita slowed to 2.1 percent in 2008 and is expected to be negative in 2009.

  11. GDP per Capita Index (PPP-Adjusted)U.S.=100, Israel and the OECD, 2007 The GDP per capita in Israel, adjusted to purchasing power parity, is lower than the GDP per capita in most of the OECD countries. In 2007 the GDP per capita in Israel stood at 56% of the GDP per capita in the USA and 77% of the OECD average. One of the challenges facing the economic policy is to increase GDP per capita both in absolute and relative terms.

  12. THE DEVELOPMENT OF GDP • THE RATE OF GROWTH IN ISRAEL • THE COMPONENTS OF GDP • DEVELOPMENTS IN SECTORS OF THE ECONOMY

  13. Real Change in Private Consumption * Quarterly – S.A., Annual rate Private consumption grew by 3.9 percent in 2008. During the year, a sharp slowdown was recorded in private consumption which stemmed, in part, from a sharp fall in consumption of durables, mainly in purchases of motor vehicles. The sharp fall in expectations with regard to the economic situation gave rise in the initial stage to a reduction in expenditures on consumer durables, and only at a later stage to a diminution of current expenditures. The slowdown in private consumption was influenced by various factors, including the sharp fall in the capital markets, which had an adverse effect on public wealth, a high degree of uncertainty and a downturn in the labor market. On the other hand, the continued reduction of tax rates increased disposable income and moderated the negative effects on private consumption. In the first quarter of 2009, private consumption fell sharply at a rate of 4.3 percent, following a fall of 3.1 percent in the fourth quarter of 2008. Private consumption excluding consumer durables fell by 2.6 percent. The fall in private consumption encompassed most of the components of consumption, except for expenses on housing and tourism, in respect of which no significant change was recorded. Also, a rise was recorded in purchases of motor vehicles following the standstill in the sector in the second half of 2008.

  14. Real Change in Fixed Investment * Quarterly – S.A., Annual rate Investment in fixed assets suffered from a standstill for a relatively long period. The sharp fall in 2001-2003 encompassed most industries within the business sector and was affected by security-related and economic uncertainty, by a general worldwide downturn and by monetary restraint. By contrast, the stability in 2004 stemmed principally from a fall in the construction item, in which large surpluses were created during the years of recession, relative to demand. The change in the trend began in 2005 and gathered momentum starting in 2006, as a result of the rapid growth and the reduction of the GDP gap, which was reflected in high utilization of the existing stock of capital. In 2008, with the increasing expectation of an economic slowdown, a sharp decrease was recorded. In addition, the crisis in the capital markets gave rise to a difficulty in raising new capital. In order to moderate the effect of the crisis, it was decided to facilitate accelerated depreciation which would create a stimulus for investments. In the first quarter of 2009, investment in fixed assets fell by 15.9 percent, with a sharp fall in investment in machinery and equipment, which is evidence of the negative expectations of the business sector for the forthcoming period.

  15. Real Change in Exports and ImportsGoods and Services * Quarterly – S.A., Annual rate Starting in 2003, significant growth in exports was recorded. The growth in exports was supported by the rapid growth in the volume of world trade as well as the sharp devaluation of the effective exchange rate of the shekel in 2003-2006. Imports to Israel grew at a slower pace than the growth in exports in 2003-2006, which led to an increase in the balance of payments surplus. The global crisis, which led to a fall in the volume of world trade and to a fall in demand for exports, had a direct adverse impact on the amount of Israeli exports in 2008. Manufacturing exports, excluding diamonds, grew by 8.0 percent; but a sharp fall was recorded in the last quarter of 2008, which strengthened in the first quarter of 2009. Simultaneously with the slowdown in the growth of exports in 2008, a sharp slowdown occurred in the growth of imports. The fall in imports was influenced both by the fall in imports of consumer products as well as by the fall in imports of raw materials and machinery, as a result of the downturn in local activity and in the demand for exports.

  16. Real Change in Public Consumption * Quarterly – S.A., Annual rate Publicconsumption grew at a rate of 2.8 percent in 2008, similar to the growth rate in previous years. In the first quarter of 2009, public consumption fell by 6.9 percent. This decrease was influenced by the lack of a new state budget, which restricted the monthly budgetary expenditure to 1/12 of the budget of the previous year.

  17. THE DEVELOPMENT OF GDP • THE RATE OF GROWTH IN ISRAEL • THE COMPONENTS OF GDP • DEVELOPMENTS IN SECTORS OF THE ECONOMY

  18. Industrial Production Index In the last few years industrial production has grown rapidly. . This growth continued until mid-2008. Starting in the middle of 2008, a sharp fall was recorded, which continued in the first quarter of 2009.

  19. Commerce and Service SectorsReal Monthly Revenue Annual Average The commerce and service sectors revenue index (which is correlated with private consumption) recorded a consistent rise from the beginning of 2004 until the beginning of 2008. In the course of 2008 a sharp reversal was recorded, which stabilized in the opening months of 2009.

  20. The NASDAQ Indexand Funds Raised in Israel from VC's The development of the technology sector, which constituted an important component in the growth of the economy in the past decade, is affected by the global developments in the sector. This sector has benefited from significant foreign investments. The direct link to global developments can be seen in the high degree of correlation between developments in the NASDAQ index and investments in Israeli start-up companies. Thus, for example, the sharp fall in the NASDAQ in 2000-2002 led to a substantial reduction in capital raising by venture-capital funds. Foreign investment in start-up companies increased in 2008, but the worsening of the global crisis in the fourth quarter of 2008 led to a fall in investments. Nevertheless, it would appear that the present crisis is expected to have a more limited impact on this sector as compared to the previous crisis, which stemmed from the bursting of the hi-tech bubble and had a direct effect on this sector in Israel.

  21. Expenditure on Civilian R&DIn percent of GDP, 2006 * 2006 or later – if available The national expenditure on civilian research and development in 2006 was 4.5 percent of GDP - significantly higher than the expenditure in other developed countries. This investment enables Israel to be one of the leading countries in the field of innovation. In 2007, the expenditure on research and development rose to 4.7 percent of GDP.

  22. Construction: Housing Starts and Fixed Investment in Residential Construction Housing starts Starting in the mid-1990s, a consistent fall has occurred in residential construction, which has stabilized at a low level since 2001. In 2008 the number of housing starts remained at a similar level to that of previous years. In the first quarter of 2009, a sharp fall occurred in the number of housing starts.

  23. Tourism: Tourist Arrivals by AirIn Thousands per Month Pope visit Operation “Cast Lead” Second Lebanon War The tourism sector constitutes a relatively limited component of GDP in the Israeli economy but it has an important effect on employment. Incoming tourism to Israel is sharply influenced by the security situation in the region. At the beginning of 2000 the number of incoming tourists was at a peak, influenced by the stability of the security situation and by the visit of the Pope. Upon the outbreak of the Al-Aqsa Intifada in September 2000, a sharp fall occurred in incoming tourism, which hit rock bottom during the period of terrorist attacks in 2002 and with the outbreak of the war in Iraq in 2003. When the security situation stabilized, a recovery in tourism occurred, but the second Lebanon War again led to a sharp fall. From the end of the war, a rapid recovery in the amount of incoming tourists was recorded which continued until the end of 2008. In December 2008 the trend was reversed due to the effect of Operation "Cast Lead" and the worsening of the global economic crisis.

  24. TRENDS IN THE ISRAELI ECONOMY • IMPLICATIONS OF THE GLOBAL CRISIS FOR THE ISRAELI ECONOMY • THE DEVELOPMENT OF GDP • FOREIGN TRADE AND THE BALANCE OF PAYMENTS • THE LABOR MARKET • THE CAPITAL MARKET • FISCAL POLICY • MONETARY POLICY AND THE RATE OF INFLATION

  25. FOREIGN TRADE AND THE BALANCE OF PAYMENTS • THE BALANCE OF PAYMENTS AND FOREIGN INVESTMENT • FOREIGN TRADE

  26. The Current AccountIn Billions of Dollars & Percent of GDP Percent of GDP * Current account surplus in the first quarter divided by the GDP in the first quarter. In 2003, the current account in the balance of payments recorded a surplus after more than ten years of deficits. The reasons for the transition to a surplus were mainly the rapid growth in exports of services and the growth in investments of Israelis overseas (growth in the revenue account). From a structural standpoint the surplus reflects a transition of manufacturing resources, which in the first half of the 1990s had been directed to the absorption of immigration, to the exporting sectors. In 2006 the balance of payments reached a record surplus of 5 percent of GDP. In 2008, the surplus in the current account of the balance of payments remained, although on a smaller scale compared with previous years. The fall in the surplus in the current account is reflected in an increase of the trade deficit. In addition, a deficit was recorded in the revenue account as a result of the decrease in the income of Israeli residents from overseas investments, as the fall in share prices on the world's financial markets was more significant than the fall in income of foreign investors from investments in Israel. The decline in dollar receipts was partially offset by the improvement in the services account and in the transfers account.

  27. Net Inflows of Foreign InvestmentIn Billions of Dollars * Excludingacquisitions by Teva. ** First quarter at annual rate. In 2006, a record amount of USD 19.0 billion (excluding the Teva-IVAX deal) in foreign investments in Israel was recorded. In 2007 these investments stood at USD 13.8 billion (USD 9.0 billion in direct investments), lower than in 2006 but significantly higher compared to previous years. Despite the global crisis, total direct foreign investment in Israel remained high, reaching approximately USD 7.8 billion in 2008. A corresponding fall occurred in the amount of investments in portfolios of securities and other investments.

  28. FOREIGN TRADE AND THE BALANCE OF PAYMENTS • THE BALANCE OF PAYMENTS AND FOREIGN INVESTMENT • FOREIGN TRADE

  29. Imports and ExportsIn Percent of GDP In the past twenty years the Israeli economy has undergone a process of opening up to international trade. Gradual growth since the late 1990s brought total imports and exports in 2007 up to 88 percent of GDP. The reasons for this increase were the various reforms that have led to the exposure of the Israeli economy to international trade, the formation of trade agreements and the growth in the volume of world trade. The growth in foreign trade as a percentage of GDP has contributed to the development and growth of the Israeli economy, but has also exposed the market to external shocks. In 2008, with the worsening of the global crisis, the rate of growth in world trade fell to 3.3 percent, which caused a slowdown in the growth of Israeli exports and imports and a fall to approximately 82 percent of GDP. In the first quarter of 2009 a sharp contraction occurred in the amount of exports and imports, corresponding to the contraction of world trade (the International Monetary Fund forecasts that the volume of world trade will fall by 12 percent in 2009).

  30. Industrial Exports Structure 26% 25% 21% 26% 24% 25% 23% 28% 24% 27% 74% 75% 79% 74% 35% 76% 75% 77% 76% 72% 73% 65% * 2009 based on January-June (annualized rate) An examination of industrial exports by technological level shows that in the last decade it was focused on high tech industries which constitute approximately three quarters of it. In 2008 the share of high tech industries was 74 percent. In the first four months of 2009, the share of high tech industries decreased, in parallel to the sharp fall in the total amount of industrial exports as a result of the fall in global demand.

  31. Destination of Exports Excluding diamonds, aircraft and ships, in US$ millions * 2009 based on January-June (annualized rate) In 2008, exports of goods to the USA constituted approximately 28 percent of total exports of Israeli goods. Exports to Europe constituted approximately 33 percent of total exports, and exports to the remaining countries constituted approximately 39 percent. In the opening months of 2009 a relatively moderate fall occurred in exports of goods to the USA as compared to the fall in exports to Europe and the rest of the world.

  32. Real Effective Exchange RateIndex, Jan. 1990 = 100 Currency Basket: US 44%, Euro 37%, UK 3%, Japan 1%, others 15%. An increase means real appreciation. The real effective exchange rate has an effect on the competitiveness of Israeli exports. The sharp devaluation in real terms in 2002-2004 reflected an adjustment of the exchange rate as a result of real shocks to the economy starting in October 2000. The devaluation in the exchange rate in real terms continued until the beginning of 2006, albeit at a slower pace. The real devaluation assisted in increasing the competitiveness of the exporting industries and supported the process of recovery of the economy. From the middle of 2006 an appreciation in real terms took place, which accelerated in the initial months of 2008. This appreciation has a negative effect on the competitiveness and profitability of Israeli exports. Shortly before the end of 2008 and at the beginning of 2009 the trend was reversed, and real devaluation was again recorded.

  33. TRENDS IN THE ISRAELI ECONOMY • IMPLICATIONS OF THE WORLD CRISIS FOR THE ISRAELI ECONOMY • THE DEVELOPMENT OF GDP • FOREIGN TRADE AND THE BALANCE OF PAYMENTS • THE LABOR MARKET • THE CAPITAL MARKET • FISCAL POLICY • MONETARY POLICY AND THE RATE OF INFLATION

  34. THE LABOR MARKET • EMPLOYMENT • WAGES AND SALARIES • POVERTY

  35. The Unemployment Rate and the Participation Rate Participation rate right axis)) The recession that started at the end of 2000 was expressed in an increase in the rate of unemployment from 8.7 percent in 2000 to 10.8 percent in 2003, among other effects. In 2004, with the start of economic recovery, the unemployment rate decreased to an annual average of 10.3 percent. This trend continued in the following years, with a fall to 7.3 percent in 2007 and 5.9 percent in the second quarter of 2008. Simultaneously with the fall in unemployment, the participation rate increased. Supportive of this process were the government’s policy of encouraging a transition from welfare to work and the reduction of the number of foreign workers, as well as long-term processes such as the growth in the percentage of highly educated workers in the labor force and a deferment of the retirement age (which contributes to the increase in the participation rate but not to the reduction of unemployment). The slowdown in the economy became evident in the labor market mainly in the last quarter of 2008 and in the first quarter of 2009, as the unemployment rate rose from 6.0 percent in the third quarter of 2008 to 6.5 percent and 7.6 percent in the following quarters respectively.

  36. Change in Israeli Employees In the last few years the pace of growth in the number of employed persons was significantly higher than the pace of growth of the civilian workforce. The rapid growth in the number of employed persons in 2004-2008 facilitated a rapid drop in the number of unemployed persons in parallel to a rise in the participation rate. Among the reasons for the rapid growth in employment were the rapid growths of the economy, a fall in the number of foreign workers (until 2005), the encouragement of a transition from welfare to work and long-term processes of change in the composition of the workforce. Shortly before the end of 2008, the pace of growth in the number of employed persons slowed; in the first quarter of 2009, the number of employed persons fell due to the strengthening effect of the economic downturn on the labor market.

  37. The Employment Rate – Ages 25-64 The Social-Economic Agenda established a target of 71.7 percent for the employment rate (the number of persons employed out of the total civilian workforce) in the 25-64 age group for 2013. As a result of the rapid growth in the number of employed persons in the labor market in the last few years, the employment rate in the first half of 2008 reached 71.1, percent as compared with 70.1 percent in 2007 and 68.5 percent in 2006. In the second half of 2008, with the economic downturn taking hold, the percentage of persons employed fell to 70.9 percent. The downward trend in the employment rate in the 25-64 age group also continued in the first quarter of 2009, as a result of the strengthening effect of the slowdown in real activity on the labor market.

  38. The Unemployment Rate and the Participation Rate By number of years of education A significant contribution to the growth in the participation rate in the last few years stemmed from the growth in the percentage of those with higher education in the working-age population. Thus, between 2001 and 2008, the group with 16 or more years of education in the working-age population increased its share from 16.9 percent to 20.3 percent, while the share of the group with 8 or less years of education fell from 14.9 percent to 11.1 percent. The importance of a high degree of education in the labor market can be ascertained from the differences in the rate of participation and in the number of unemployed persons among the various groups. The unemployment rate of those with 16 or more years of education stood at 3.3 percent, as compared with 7.9 percent among those with 9-12 years of study. The differences between the groups stem from factors including the high demand for highly educated employees, which is also expressed in wages.

  39. The Participation Rate Age 25-64, 2007 The standard of living in Israel, which is low compared to Western Europe and the USA, is accounted for by factors including the low workforce participation rate, mainly among men. The groups in which low rates of participation have been clearly recorded are Jewish ultra-orthodox men and Arab women. An international comparison of the participation rate reveals that despite the growth in the participation rate in recent years in Israel, we are still far from the participation rate in most of the developed countries.

  40. THE LABOR MARKET • EMPLOYMENT • WAGES AND SALARIES • POVERTY

  41. Real Wages, 1999-20092004 prices, CPI-adjusted *Jan – April average. s.a. Wages in real terms in the business and public sectors recovered in 2003-2005, following a sharp fall in 2001-2002. Average wages in real terms continued to rise in 2006-2007 at a relatively moderate pace. The moderate rise in wages in the last few years, despite the significant fall in the number of unemployed persons, is attributed in part to: *The reductions in taxes which increased the net income of employees and diminished the pressures for wage hikes. *The rise in the participation rate (mainly participation of low-paid workers). Wages in real terms fell by 0.9 percent in 2008 compared to the previous year. In the first half of the year a rise in nominal wages was recorded, as a result of the improvement in the labor market, but this rise was for the most part offset by the rapid (and unexpected) rise in prices during this period. During the second half of the year, with the worsening of the downturn in the economy, wages in nominal terms also fell.

  42. THE LABOR MARKET • EMPLOYMENT • WAGES AND SALARIES • POVERTY

  43. The Rate of Poverty in Israeli households* * A household is considered poor if its disposable income per capita is lower than 50 percent of the national median per capita income. The rate of poor households rose in 2002-2005, from 18.1 percent to 20.6 percent. This rate fell to 20.0 percent in 2006. The fall in the poverty rate stemmed in part from a fall in the number of poor households where the head of the household is an elderly person, as a result of the increase in old-age benefits. Among these households the poverty rate fell from 25.1 percent in 2004 to 21.5 percent in 2006. The poverty rate remained stable in 2007 and stood at 19.9 percent. In 2007, the main improvement in the poverty rate resulted from the labor market: The incidence of poverty among working families remained stable (12.2 percent), while the poverty rate among households in which there are no wage earners continued to rise (from 66.6 percent to 69.8 percent in 2007).

  44. TRENDS IN THE ISRAELI ECONOMY • IMPLICATIONS OF THE WORLD CRISIS FOR THE ISRAELI ECONOMY • THE DEVELOPMENT OF GDP • FOREIGN TRADE AND THE BALANCE OF PAYMENTS • THE LABOR MARKET • THE CAPITAL MARKET • FISCAL POLICY • MONETARY POLICY AND THE RATE OF INFLATION

  45. THE CAPITAL MARKET • MARKET INDICES • BOND AND SHARE ISSUES

  46. Market Indices: StocksJanuary 2006=100, monthly average The Tel Aviv 100 index recorded a fall of approximately 17 percent in 2008 (2008 average as opposed to 2007 average), similar to the fall of the NASDAQ index in the USA. The sharp fall started in September with the worsening of the global financial crisis. In the first half of 2009 a recovery took place in the share indices, corresponding to a rise in the leading share indices globally.

  47. Market Indices: Corporate Bonds • The corporate bond indices recorded a sharp fall in September - November 2008 with the worsening of the financial crisis. Correspondingly, a sharp rise took place in the number of bond series trading at a high yield of more than 20 percent. Whereas in August 2008 (prior to the worsening of the crisis) only about one-fifth of bond series were traded at a high yield, in March 2009 approximately 43 percent of all bond series were traded at a yield of more than 20 percent. As a result of the improvement in the capital market in April and May, the percentage of bonds trading at a yield higher than 20 percent fell from 43 percent to 29 percent in May.

  48. THE CAPITAL MARKET • MARKET INDICES • BOND AND SHARE ISSUES

  49. Capital Market: Stock & Bond IssuingNIS Billions, current prices, 1996-Q1 2009 * Quarterly data at an annualized rate. • Corporate bond issues decreased by approximately 73 percent in 2008, while share issues also fell significantly. During the first quarter of 2009, issues increased relative to the previous two quarters, although the level was still low. Bank credit continued to increase in 2008, but not at a sufficient pace in order to compensate for the sharp fall in the raising of non-bank credit. Bank credit grew at a rapid pace in the initial months of 2008, but in November the pace slowed and in December no growth at all was recorded .

  50. TRENDS IN THE ISRAELI ECONOMY • IMPLICATIONS OF THE WORLD CRISIS FOR THE ISRAELI ECONOMY • THE DEVELOPMENT OF GDP • FOREIGN TRADE AND THE BALANCE OF PAYMENTS • THE LABOR MARKET • THE CAPITAL MARKET • FISCAL POLICY • MONETARY POLICY AND THE RATE OF INFLATION

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