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ECONOMIC HIGHLIGHTS4th QUARTER 2008STATE OF ISRAEL
MINISTRY OF FINANCE
INTERNATIONAL AFFAIRS DEPARTMENTFebruary 2009International
Affairs Department
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ContentsNote:You can return to the beginning of each chapter by
clicking this symbols on the top of each slide.Economic
FiguresBalancesInternational ComparisonsIsrael and the
OECDInternational TreatiesRelevant SitesMain CharacteristicsAbout
the Economic Crisis and Operation Cast Lead
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Israels Economy:Highly Educated Population.Rapid Development of
Technology & High-Tech Industries.Entrepreneurial Culture. Open
Economy.High Trade intensity.Main Characteristics
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Economic FiguresGDP and GDP per CapitaMajor GDP
ComponentsGrowth: Israel compared to the WorldExports of Goods and
ServicesExports of Goods by RegionForeign InvestmentsUnemployment
& Participation RatesInflation RateEstimates for 2008Press for
desired slide or continue:Back to ContentsMain Indicators and
Forecast6-78910111214151618Main Trading Partners13Inflation Rate
Worldwide17The Financial Crisis and operation Cast Lead5
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Operation "Cast Lead" and the World Economic CrisisThe economic
indicators of the 3rd and 4th quarter of 2008, presented here
throughout the presentation, show that the global crisis has
started affecting the Israeli market. Initiatives such as the
acceleration program, the pension safety net and the monetary
program to increase liquidity are all aimed to offer new jobs, to
protect private savings and to promote continuous growth in
Israel.
The impact of operation "Cast Lead" on Israels economy has been
limited as most businesses in Israels southwest, near the Gaza
strip, continued to operate. Israels financial and industrial
center, located out of the rocket range, continued to operate in
full scale. The ports and other trade facilities continued to
operate as usual, ensuring the flow of goods in and out of the
country were running smoothly.
This Issue of "Economic Highlights" offers you a review of the
3rd and 4th quarter of 2008. A review of Israel's economy in 2008
and the full economic impacts of "Cast lead" will be presented in
our next issue.
5
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Main Economic Indicators*Using public exchange rate. *** Based
on the 3rd quarter of 2008. ** In current prices 6
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Source: Ministry of Finance, Central Bureau of StatisticsMain
Economic Indicators(con.)7
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GDP and GDP per Capita
(Annual rate of change (%), in Constant Prices)8In the past few
years, Israels economy has enjoyed high growth rates. In light of
the world economic crisis, Israels growth has slowed down.*
Estimate.Source: Ministry of Finance.
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GDP GrowthIsrael compared to Advanced Economies* (Annual rate of
change (%), in constant prices)* Weighted average: US - 40%, Euro
area 42.8%, Japan 2.7%, UK 6.5%, Asian Newly Industrialized
countries - 8%** Estimate.Source: Ministry of Finance.Since 2004,
Israels growth rate has exceeded the average growth rate of
advanced economies.9
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Major GDP Components
(Annual rate of change (%), in constant prices)Source: Ministry
of Finance10
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Exports of Goods and Services ($B)Source: Central Bureau of
Statistics11In 2008, Exports grew by 3.6%.
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Exports of Goods by Region (excluding Diamonds)Source: Central
Bureau of Statistics(USA: 28%)(USA: 28%)2008200712
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Israels Main Trading Partners
(US$ Billions, excluding diamonds)Source: Central Bureau of
Statistics132007China is becoming a leading trade partner for
Israel
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Net Foreign Investments in Israel (B$)Source: Ministry of
Finance14
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Unemployment and Participation (As % of Total Labor Force)
Source: Central Bureau of StatisticsThe Acceleration program,
announced by the Ministry of Finance, is a package of economic
measures designed to accelerate activity in the Israeli economy,
with emphasis on the labor market.15
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Inflation Rate
(Rate of Change in CPI, end of year)Source: Central Bureau of
Statistics, Ministry of FinanceThe Consumer Price Index (CPI) grew
by 3.8% during 2008.16
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Inflation Rate Worldwide
(Rate of Change in CPI, end of 2007)Inflationary pressures in
Israel have decreased, as a result of the world crisis. The CPI
registered negative growth rates in October and November
2008.173.4%
Sources: Central Bureau of Statistics, OECD
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Growth of Main GDP Components 2008Source: Ministry of
Finance
2008 (Estimated)
18
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BalancesBudget Deficit ;Current Account ;Net Foreign DebtGeneral
Government ExpenditureGross Public DebtGross Tax BurdenBack to
ContentsPress for desired slide or continue:20212223
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Gross Public Debt
(as percentage of GDP)Source: Ministry of Finance Since 2003,
the gross public debt has been on a downward trend.20
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Budget Deficit and General Government Expenditure
Source: Ministry of Finance21Budget DeficitGeneral Government
Expenditure (% of GDP)
2
0.435
0.442
0.45
0.455
0.476
0.504
1
20072006200520042003199920070.80%20070.02%
Budget
Deficit0.02%1.00%1.90%3.60%5.40%3.20%20061.20%20061.00%
20051.60%20051.90%
20043.00%20043.60%
20034.80%20035.40%
20025.40%20023.60%
20014.60%20014.20%
20082007200620052004200320002.40%20000.70%
Government
Expenditure43.50%44.20%45.00%45.50%47.60%50.40%19993.70%19993.20%
1
0
0
0
0
0
0
0
0
0
2
0.008
0.012
0.016
0.03
0.048
0.054
0.046
0.024
0.037
3
1
0.021
0
0.01
0.018
0.036
0.053
1
200820072006200520042003200220012000199920070.80%20070.02%
Budget
Deficit2.10%0.00%1.00%1.80%3.60%5.30%3.50%4.20%0.70%3.20%20061.20%20061.00%
20051.60%20051.90%
20043.00%20043.60%
20034.80%20035.40%
20025.40%20023.60%
20014.60%20014.20%
200820072006200520042003200220012000199920002.40%20000.70%
Government
Expenditure0.80%1.20%1.60%3.00%4.80%5.40%4.60%2.40%3.70%19993.70%19993.20%
1
0.0002
0.01
0.019
0.036
0.054
0.036
0.042
0.007
0.032
2
0
0
0
0
0
0
0
0
0
3
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Current Account Balance and Net Foreign Debt* As of 30/06/08, as
percentage of 2007 GDP.Source: Ministry of Finance.In 2003, current
account turned positive, conversely with the decrease of the net
foreign debt.Current Account Surplus (% of GDP)Net Foreign Debt(%
of GDP)22
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Gross Tax Burden (as % of GDP)Source: Ministry of Finance,
OECD*As of 2006 Tax burden has been in the vicinity of OECD average
since 200323- - - OECD countries average: 35.9%*
1
0.363
0.373
0.373
0.366
0.358
0.358
0.359
0.364
0.368
0.343
1
1999200020012002200320042005200620072008
36.30%37.30%37.30%36.60%35.80%35.80%35.90%36.40%36.80%34.30%
1
0
0
0
0
0
0
0
0
0
0
2
3
MBD000CDBDA.xls
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International comparisonsand additional dataCentral Bank
Interest RatesNASDAQ and Tel Aviv 100 IndicesIsraels Credit
RatingGlobal Competitiveness IndexGlobal Competitiveness Index:
Selected IssuesBusiness Competitiveness Index ;Network Readiness
IndexPress for desired slide or continue:Back to
Contents252627283129
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Central Bank Interest Rates Israel vs. U.S.A
Source: Bank of Israel (BOI), Federal
Reserve2006200720082009Bank of Israel Rate (BOI)U.S. Federal Funds
Rate1.00%0.0%25Coinciding with the decrease of the FEDs interest
rate, BOI interest rate has been steadily decreased during the last
quarter of 2008.
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NASDAQ & Tel Aviv 100
(monthly average)Source: Tel Aviv Stock Exchange (TASE) and the
Ministry of Finance.26Tel Aviv 100 reacts to the current events
similarly to the NASDAQ, yet less drastically.
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Israels Credit Rating 1992-2008Source: Credit Rating Agencies,
Accountant General27In January 2009, The Credit Rating Agencies
Moody's and S&P Reconfirmed Israel's Credit Ratings Regarding
operation "Cast Lead", S&P commented that "We do not expect the
conflict with Hamas in Gaza to have significantly damaged the
sovereign's creditworthiness".
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Source: World Economic Forum, Global Competitiveness Index,
2008-9Global Competitiveness Index, 2008-2009Countries that have
been invited for open discussions for joining the OECD.28Israel
Ranks 23rd out of 134 Countries
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Global Competitiveness Index, 2008/9SELECTED CATEGORIESVenture
Capital AvailabilitySource: World Economic Forum, Global
Competitiveness Index, 2008-9Availability of Scientists &
EngineersQuality of Scientific Research InstitutionsCompany
Spending on R&DRANKRANKRANK RANK 29
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Strength of Investor ProtectionSource: World Economic Forum;
Global Competitiveness Index, 2008-9Availability of Latest
TechnologiesUtility PatentsLegal Rights IndexRANKRANKRANKRANKGlobal
Competitiveness Index, 2008/9SELECTED CATEGORIES30
(con.)
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Countries that have been invited for open discussions for
joining the OECDSource: World Economic Forum; Global
Competitiveness Index (GCI), 2006; Global Information Technology
Report*NRI: Measures the level of ICT (Information and
Communication Technologies) development of nations [LINK TO
SITE]**GCI: Provides a holistic overview of factors critical to
productivity and competitiveness [LINK TO SITE]Network Readiness
Index (NRI)* 2007-8Business Competitiveness Index2008-9Israels Rank
in Leading
Indices31GreeceCroatiaRussiaItalySloveniaEstoniaSpainChileNew
ZealandIsraelIrelandFranceJapanFinlandSwitzerlandUSA
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Israel and the OECDReal GDP growth in 2007-8Unemployment Rate in
2007-8Press for desired slide or continue:Back to ContentsGDP Based
on PPP per Capita in 2006444543
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Real GDP Growth
(Annual percentage of change, partial list)Source and
projections: OECD and the Ministry of Finance, Israel2.6%1.4%The
global recession has influenced all of the OECD countries growth
rates.5.3% 074.1% 0833
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Unemployment Rate (average)Source: OECD, Ministry of
FinanceWhile the OECD average unemployment rate grew between 2007
2008, Israels Unemployment rate decreased by 1.3%.3408 0708
07080708 07Change 07-08
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GDP per capita based on purchasing-power-parity (PPP) 2007, (in
US$)33,29425,758Source: Economics and Research Department
calculations from OECD and the Central Bureau of Statistics
data35
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International TreatiesIsraels Free Trade AgreementsAvoidance of
Double Taxation AgreementsCooperation in Industrial R&D
AgreementsProtection of Investments AgreementsInternational
Organization MembershipsPress for desired slide or continue:Back to
Contents38-94041-24337
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Israels Free Trade Agreements371985199219971997European Union
(Association
Agreement)USAEFTACanadaTurkeyMexicoMERCOSUR*199920002007* The
agreement with Estonia has only been signed initially
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Avoidance of Double Taxation Agreements* The agreement with
Estonia has only been signed initially38
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(con.)
* The agreement with Portugal has been recently
ratifiedAvoidance of Double Taxation Agreements39
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Cooperation in Industrial R&D
AgreementsBelgiumCanadaChinaFranceHong
KongItalyNetherlandsPortugalSpainUKUSASingaporeIrelandSwedenFinlandGermanyIndiaAustriaKorea40
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Protection of Investment Agreements 41
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Protection of Investment Agreements (con.)42
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International Organization* Memberships: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 | UNHCRUNIDO
| UPU | WCO | WFP | WHO | WIPO | WMO | WTOOWTRO | WTO | ICSID*
Economic Organizations43
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Relevant SitesBack to ContentsGovernment Institutions:Ministry
of FinanceOECD Stat Profile on IsraelBank of Israel (BOI)Central
Bureau of StatisticsIsraeli Government PortalIsrael Securities
AuthorityMinistry of Industry, Trade and Labor OECD
IsraelWWW.FINANCEISRAEL.MOF.GOV.ILInternational Affairs Department
Homepage:
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We welcome your feedback!Contact:
Ms. Ravit FriedbergInternational Affairs DepartmentMinistry of
Finance, Jerusalem, [email protected] Start AgainClick
here for our website!www.FINANCEISRAEL.mof.gov.il