Economy of Israel

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Israel has a diversified modern economy with substantial government ownership and a rapidly developing high-tech sector. Poor in natural resources, Israel depends on imports of petroleum, coal, food, uncut diamonds, other production inputs, and military equipment. It also has received substantial direct economic aid from the United States, including approximately $1.2 billion per year since the mid-1970's, although that regular annual amount has been being tapered off by $120 million per year beginning in 1998. In 2006, direct economic aid from the US amounted to $240 million, or about 0.15% of Israel's GDP. In addition, Germany also gives $500 million per year, as annual reparations resulting from the Nazi murder of 6 million Jews in the Holocaust. The country's GDP (Purchasing power parity) in 2005 reached $155 billion, about $25 thousand per capita, roughly comparable to middle-income European nations such as Greece or Spain. The major industrial sectors include metal products, electronic and biomedical equipment, processed foods, chemicals, and transport equipment. Israel possesses a substantial service sector and the Israel diamond industry is one of the world's centers for diamond cutting and polishing. It is also a world leader in software development and is a major tourist destination. In 1998, Tel Aviv was named by Newsweek as one of the ten most technologically influential cities in the world.^[1] American billionaires and business tycoons Bill Gates, Warren Buffet, and Donald Trump have each praised Israel’s economic environment.^[2]

1 Macro-economic trend
2 Income
3 Statistics
4 See also
5 References
6 External links

[edit] Macro-economic trend

Israel's strong commitment to economic development and its talented work force led to economic growth rates during the nation's first two 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. Also worthy of mention is the 1983 Bank stock crisis. 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 its rapid growth in the 1990s.

Two developments have helped to transform Israel's economy since the beginning of the 1990s. The first is waves of Jewish immigration, predominantly from the countries of the former USSR, that has brought over one million of new citizens to Israel. These new immigrants, many of them highly educated, now constitute some 16% of Israel's 6.5 million population. 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 have given the Israeli economy a strong upward push.

The second development benefiting the Israeli economy is the peace process begun at the Madrid conference of October 1991, which led to the signing of accords led to a peace treaty between Israel and Jordan (1994), although the Oslo Accords between Israel and the Palestinians led to the Second Intifada, which caused Israel to lose billions of dollars in economic terms. However, peace process with the Arab and European worlds has helped to ease Israel's economic isolation from its neighbors and has begun a process of regional economic integration that may help to stabilize the region. It has also opened up new markets to Israeli exporters farther afield, such as in the rapidly growing countries of East Asia. The peace process has stimulated an unprecedented inflow of foreign investment in Israel, as companies that formerly shunned the Israeli market now see its potential contribution to their global strategies.

Israeli companies, particularly in the high-tech area, have recently enjoyed considerable success raising money on Wall Street and other world financial markets; Israel now ranks second among foreign countries in the number of its companies listed on U.S. stock exchanges.

The United States is Israel's largest trading partner; two-way trade totaled some $12.6 billion in 1997. The principal U.S. exports to Israel include computers, integrated circuits, aircraft parts and other defense equipment, wheat, and automobiles. Israel's chief exports to the U.S. include cut diamonds, jewelry, integrated circuits, printing machinery, and telecommunications equipment. 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 ten years. An agricultural trade accord was signed in November 1996, which addressed the remaining goods not covered in the FTA. Some non-tariff barriers and tariffs on goods remain, however. Israel also has trade and cooperation agreements in place with the European Union and Canada, and is seeking to conclude such agreements with a number of other countries, including Turkey, Jordan and several countries in Eastern Europe.

Until the last decade, Israel's trade with the Arab world was minimal due to the Arab League boycott. Beginning in 1945, Arab nations not only refused to have direct trade with Israel (the primary boycott), but they also refused to do business with any corporation that operated in Israel, or any corporation that did business with a corporation that did business with Israel (the secondary and tertiary boycotts).

2.8% of the country's GDP is derived from Agricultural activity. While Israel imports substantial quantities of grain, it is largely self-sufficient in other agricultural products and food stuffs, due to the fact that food must be regulated Kashrut for sell in the Israeli retail market, and hence imports almost no food products from other countries. For centuries, farmers in Israel have grown varieties of citrus fruits such as grapefruit, oranges and lemons. Citrus fruits, are still Israel's major agricultural export (see Jaffa orange).

Israel is one of the world's major exporters of military equipment, accounting for 10%^{[citation needed]} of the world total in 2007.

[edit] Income

Comparing incomes of a median household in Israel vs. other countries.

OECD, PPP conversion rates. Retrieved on 2006-01-20. OECD, PPP conversion rates in Israel. Retrieved on 2007-01-25.

Country	Median household income national currency units	Year	PPP rate (OECD)	Median household income (PPP)
Switzerland^[5]	CHF 95,772	2003	1.76	$54,000
California, US^[6]	US State			$54,000
United States	US$46,000	2006	1.00	$46,000
Canada ^[7]	CAN$53,528		1.25	$43,000
New Zealand ^[8]	NZ$58,708		1.47	$40,000
United Kingdom ^[9]	GBR£24,700	2004/05	0.631	$39,000
Scotland^[10]	GBR£24,128	2004/05	0.631	$38,000
Ireland	€35,410		1.00	$35,000
Australia^[11]	AUS$46,326	2006	1.36	$35,000
West Virginia, US^[12]	US state			$33,000
Hong Kong^[13]	HK$186,000	2005	5.96	$31,000
Israel^[14]	99,168 ILS	2004	3.23	$31,000
Singapore^[15]	$45,960	2005	1.55	$30,000

Annual data 2006	Historical averages (%) 2002-06
Population (m) - 7.1	Population growth - 1.8
GDP per head (US$; purchasing power parity) - 27,588	Real GDP growth - 3.1
Percent of unemployed persons (January 2007) - 7.6	Inflation - 1.9
Exchange rate (av) NIS:US$ - 4.2	Current-account balance (% of GDP) - 1.6

[edit] Statistics

The following statistics are from the CIA World Factbook:^[3]

GDP: purchasing power parity - $166.3 billion (2006 est.)

GDP (official exchange rate): $140.3 billion (2006 est.)

GDP - real growth rate: 5.1% (2006 figure) ^[4]

GDP - per capita: purchasing power parity - $26,200 (2006 est.)

GDP - composition by sector

agriculture: 2.6%
industry: 30.8%
services: 66.6% (2003 est.)

Investment (gross fixed): 17.3% of GDP (2006 est.)

Population below poverty line: 21.6% (2005)

Household income or consumption by percentage share

lowest 10%: 2.4%
highest 10%: 28.31% (2005)

Distribution of family income - Gini index: 38.6 (2005)

Inflation rate (consumer prices): -0.1% (2006)

Labor force: 2.42 million (2005 est.)

Labor force - by occupation: agriculture, forestry, and fishing 2.6%, manufacturing 20.2%, construction 7.5%, commerce 12.8%, transport, storage, and communications 6.2%, finance and business 13.1%, personal and other services 6.4%, public services 31.2% (1996)

Unemployment rate: 8.2% (2006 est.)

Budget

revenues: $43.82 billion
expenditures: $58.04 billion, including capital expenditures of NA (2006 est.)

Public debt: 89% of GDP (2006 est.)

Agriculture - products: citrus, vegetables, cotton; beef, poultry, dairy products

Industries: high-technology projects (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 and footwear

Industrial production growth rate: 4.8% (2005 est.)

Electricity - production: 44.24 billion kWh (2003)

Electricity - consumption: 39.67 billion kWh (2003)

Electricity - exports: 1.47 billion kWh (2003)

Electricity - imports: 0 kWh (2003)

Oil - production: 2,740 bbl/day (2003 est.)

Oil - consumption: 270,100 bbl/day (2003 est.)

Oil - exports: NA (2001)

Oil - imports: NA (2001)

Oil - proved reserves: 1.92 million barrels (305,000 m³) 1 January 2002

Natural gas - production: 200 million m³ (2003 est.)

Natural gas - consumption: 200 million m³ (2003 est.)

Natural gas - exports: 0 m³ (2001 est.)

Natural gas - imports: 0 m³ (2001 est.)

Natural gas - proved reserves: 38.94 km³ (1 January 2002)

Current account balance: $1.463 billion (2006 est.)

Exports: $42.86 billion f.o.b. (2006 est.)

Exports - commodities: machinery and equipment, software, cut diamonds, agricultural products, chemicals, textiles and apparel, military equipment, food.

Exports - partners: US 36.8%, Belgium 7.5%, Hong Kong 4.9% (2004)

Imports: $47.8 billion f.o.b. (2006 est.)

Imports - commodities: raw materials, military equipment, investment goods, rough diamonds, fuels, grain, consumer goods

Imports - partners: US 15%, Belgium 10.1%, Germany 7.5%, UK 6.1%, Switzerland 6.5% (2004)

Reserves of foreign exchange & gold: $28.2 billion (2006 est.)

Debt - external: $81.98 billion (30 June 2006 est.)

Economic aid - recipient: $240 million from US, $500 million from Germany (FY06)

Currency: new Israeli shekel (ILS); note - NIS is the currency abbreviation; ILS is the International Organization for Standardization (ISO) code for the NIS

Currency code: new Israeli shekel (ILS); note - NIS is the currency abbreviation; ILS is the International Organization for Standardization (ISO) code for the NIS