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1conomics Department27/11/02
The Israeli Economy:Facts and Prospects
Presentation for theItalian Delegation to the Tel Aviv
Convention
byEphraim Toaff, PhD
December 2002
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2conomics Department27/11/02
0
5
10
15
20
25
30
35
40
USA
Switzerland
D
enmark
Japan
G
ermany
U.K.
Canada
France
Italy
Israel
Spain
Greece
Russia
China
GDP Per-Capita
$ thousands,The EIU forecast for 2002
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3conomics Department27/11/02
GDP Growth
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
8%
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003*
* forecast
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4conomics Department27/11/02
National Accountsreal rate of change
2000 2001 *2002 *2003 Q1/02 Q2/02 Q3/02
Gross Domestic Product 7.4% -0.9% -0.9% 1.5% 2.4% -0.7% 0.5%
GDP per Capita 4.6% -3.2% -2.9% -0.5% 0.6% -2.4% -1.4%
GDP - Business Sector 9.7% -2.4% -2.9% 1.7% 0.3% -0.8% 0.0%
Private Consumption 7.2% 2.5% -0.2% 2.5% 0.0% -4.6% -0.8%
Government consumption 1.3% 3.3% 6.5% 1.0% 13.8% 5.6% -2.6%
Investment in Fixed Assets 1.7% -6.1% -6.3% 0.6% -6.2% 4.8% -17.0%
Exports of Goods and Services 25.3% -11.7% -5.0% 4.0% -5.4% 15.5% -16.6%
Imports of Goods and Services 12.3% -4.5% -2.0% 3.5% 4.6% 16.6% -23.6%
Quarters
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5conomics Department27/11/02
-10%
-8%
-6%
-4%
-2%
0%
2%4%
6%
8%
10%
I/98
III/9
8I/99
III/9
9I/00
III/0
0I/01
III/0
1I/02
III/0
2
%7.4
%2.4
%2.6
Growth
quarterly data, in annual terms
-0.9%
-0.9%
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6conomics Department27/11/02
Private Consumption
1998=100
0
50
100
150
200
250
300
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Total consumption
Durable goods
Personal
transport
equipment
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77conomics Department27/11/02
Thousands of EmployeesUnemployment Rate
Unemployment Rate and the Number of Employees
4%
6%
8%
10%
12%
1.85 1.86 1.87 1.88 1.89 1.9 1.91 1.92 1.93 1.94 1.95 1.96 1.97 1.98 1.99'1.00 1.01 1.02
0
600
1,200
1,800
2,400
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88conomics Department27/11/02
The Labor Market
Participatio
n rate
Unemplo
yment
rate
Unempl
oyed
person
s
Employ
ment
Labor
force
Population
aged 15+ Population Immigration
(2+3)/1 3/(2+3) 3 2 2+3 1
53.4% 7.6% 165 2,040 2,205 4,129 5,829 66.2 1997
53.5% 8.5% 193 2,074 2,266 4,243 5,971 56.7 1998
53.8% 8.9% 209 2,137 2,345 4,358 6,125 76.8 1999
54.3% 8.8% 214 2,221 2,434 4,487 6,289 60.1 2000
54.3% 9.4% 235 2,265 2,500 4,605 6,439 43.6 2001
54.0% 10.6% 269 2,272 2,541 4,706 6,568 30 * 2002
54.0% 10.8% 281 2,317 2,597 4,810 6,699 30 *2003
% change
16.9% 1.8% 2.8% 2.8% 2.4% -14.3% 1998
8.2% 3.1% 3.5% 2.7% 2.6% 35.4% 1999
2.5% 4.1% 3.8% 2.9% 2.7% -21.7% 2000
9.9% 2.0% 2.7% 2.6% 2.3% -27.5% 2001
14.6% 0.3% 1.7% 2.2% 2.0% -31.2% *2002
4.1% 2.0% 2.2% 2.2% 2.0% 0.0% *2003
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99conomics Department27/11/02
The Development of Wagesconstant prices, 12 months moving average
5500
6000
6500
7000
7500
8000
1,997 1,998 1,999 2,000 2,001 2,002
Average wage
Public sector
Business sector
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1010conomics Department27/11/02
Export of Goods and Servicesreal rate of change
Export of goods and services
World trade volume
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
1995 1996 1997 1998 1999 2000 2001 2002* 2003*
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1111conomics Department27/11/02
0
50
100
150
200
250
84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 '00 '01 '02
Tourist Arrivals by Air in Israelthousands per month
Gulf War
Achille Laura Intifada
The Papal Visit
Terror Attacks
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Inflation
* forecast
17.6 %18.0 %
10.6 %
20.7 %
16.4 %
16.1%
19.6 %
3.5%
7.5%
0.0%
1.4%
7.0%8.1%
14.5 %
11.2 %9.4%
1.3%
8.6%
18.1 %
9.9 %
2.7%
0%
5%
10%
15%
20%
25%
86 88 90 92 94 96 98 '00 '02*
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1313conomics Department27/11/02 Budget Deficit
% of GDP
0%
1%
2%
3%
4%
5%
1994 1995 1996 1997 1998 1999 2000 2001 2002*
Maastricht criteria
* forecast
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1414conomics Department27/11/02
109 104 104 99 97 93 90 84 79 78 76 76 7266
69 75
4643 39
3330 32 32
3027 26 26 29 26
24 2628
0
20
40
60
80
100
120
140
160
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
June
-02
Government Debt
% of GDP
Foreign
Domestic
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Defense Consumption
% of GDP
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Current Account Deficitmillion of dollars and % of GDP
* forecast
1.3
-1.4
-0.8
0.2 0.2
-1.3
-0.9
-2.4
-3.4
-5.0
-5.6
-4.0
-1.3
-3.3
-2.0 -1.9
-3.4
-3.7
-6
-5
-4
-3
-2
-1
0
1
2
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003*
-8%
-6%
-4%
-2%
0%
2%
4%
6%
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1818conomics Department27/11/02 Foreign Investment
millions of dollars
Foreign Investment in Israel
Israelis Investment. Abroad
Net Investment. in Israel
* annual terms according to first 9 months
-2,000
0
2,000
4,000
6,000
8,000
10,000
12,000
1995 1996 1997 1998 1999 2000 2001 2002*
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-1500
-1000-500
0
500
1000
1500
2000
2500
3000
Q3-00 Q4-00 Q1-01 Q2-01 Q3-01 Q4-01 Q1-02 Q2-02 Q3-02
Foreign Investmentmillions of dollars
Foreign Investment in Israel
Israelis Investment. Abroad
Net Investment. in Israel
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2020conomics Department27/11/02
0
20
40
60
80
100
120
140
75 77 79 81 83 85 87 89 91 93 95 97 99 2001
Foreign Debt
% of GDP
Net
Gross
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Interest Rates Differential
Federal Funds
BOI Monetary Lending Rate
Interest Rates
Differential
0%
2%
4%
6%
8%
10%
12%
14%
12.99 12.00 12.01
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2222conomics Department27/11/02
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
01/92
01/93
01/94
01/95
01/96
01/97
12/97
12/98
12/99
12/00
12/01
Basket
Dollar
Exchange Rate
6%
2%0%
7%
4%7%
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Inflation, Exchange Rate and Budget Deficit
1998 1999 2000 2001 2002* 2003*
Inflation and the exchange rate (Dec./Dec.)
Consumer price index 8.6% 1.3% 0.0% 1.4% 7.2% 3.5%
Wholesale price index of industrial
output 8.2% 3.5% 3.0% -1.9% 7.5% 2.5%
Devaluation of the NIS -vs- currency
basket 20.6% -2.5% -6.3% 3.7% 15.0% 4.0%
The budget
Total deficit in budget 2.4% 2.5% 0.7% 4.50% 4.5% 3.5%** Excluding net credit
* forecast
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10 years to maturity
5 years to maturity
CPI Linked Bond Yields
0%
1%
2%
3%
4%
5%
6%
7%
8%
1.86
1.87
1.88
1.89
1.90
1.91
1.92
1.93
1.94
1.95
1.96
1.97
1.98
1.99
1.00
1.01
1.02
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2525conomics Department27/11/02 Non - Linked Bond Yields
10 years to maturity
0
2
4
6
8
10
12
14
2001.05 2001.11 2002.05 2002.11