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flag Israel Israel: Economic and Political Outline

In this page: Economic Indicators | Foreign Trade in Figures | Sources of General Economic Information | Political Outline

 

Economic Indicators

The Israeli economy, long protected from the global economic crisis, experienced a slowdown in 2011 and has been stagnating at around 3% due to a decline in consumption and a weak external demand. In 2013, economic growth reached 3.8% of the GDP thanks to the opening of new natural gas fields. It should remain stable in 2014 due to weak domestic demand and an international context which does not stimulate exports.

The economic fundamentals of Israel, which joined the OECD in 2010, are solid, but vulnerabilities exist: public debt is high compared with other emerging countries, defense spending reduces the tax manoeuvering space, the economy is very dependent on exports to Europe and the United States, there is a lack of university graduates and property prices are soaring. The 2013-2014 budget, which was adopted in July, is based on an austerity plan to reduce the budget deficit: budget cuts to save around 3 billion euro and a rise in taxation. In October, the government agreed to increase the defense budget which had been reduced to help rebalance the state finances. The country spends four times as much on its defense as its fellow members of the OEDC. New budget cuts have been announced for the 2015 budget year, introducing new reductions in public services, although Israel has the lowest levels of welfare spending among the OEDC countries and a high level of inequality. In addition to the decrease in public spending, a drop in tax revenue has been predicted. The resulting regional instability and lack of security are a major concern.

Israel enjoys one of the highest standards of living in the area and the average salary is at a close level to the European average. However, 25% of Israelis live in poverty and inequalities are strong, which explains the reasons of the social revolt against price increase, which erupted in 2011. The unemployment rate experienced a rise in connection to the global crisis, but decreased again to 6% in 2011. As the IMF has stressed, Israel should confront the problem of social and economic integration of the Arab and Haredi minority.

 
Main Indicators 20112012201320142015 (e)
GDP (billions USD) 258.41257.21290.64304.98321.24
GDP (Constant Prices, Annual % Change) 4.23.03.2e2.52.8
GDP per Capita (USD) 34,29133,3973637,91439,075
General Government Balance (in % of GDP) -4.5-5.5e-3.4e-2.7-2.5
General Government Gross Debt (in % of GDP) 69.768.367.6e67.4e67.1
Inflation Rate (%) 3.51.71.5e0.81.8
Unemployment Rate (% of the Labor Force) 7.16.96.36.06.0
Current Account (billions USD) 3.932.125.96e5.72e6.39
Current Account (in % of GDP) 1.50.82.11.9e2.0

Source: IMF - World Economic Outlook Database , Last Available Data

Note: (e) Estimated Data

Main Sectors of Industry

Israel has a diversified and technologically advanced economy. The agricultural sector employs under 2% of the population and the country's main crops are fruits and vegetables, cereals, wine and cattle farming. The country is self-sufficient in food production, with the exception of cereals.

The fields of excellence of the Israeli industry are chemical products (Israel specializes in generic medicines), plastics engineering and high technologies. The companies, particularly those of the state-of-the-art technology, have profited from the collection of funds arriving from Wall Street and other financial centers of the world. As a fact, Israel classifies second, after Canada, for the number of companies registered in the American stock market. The state-of-the-art technologies (aeronautics, electronics, telecommunications, software, bio-technologies) represent about 40% of GDP. The other important activity sectors in Israel are diamond cutting, textile and tourism. This last sector remains important despite the Israeli-Palestinian conflict. 

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 1.7 20.4 77.1

Source: World Bank - Last Available Data.

 
 
 
Monetary Indicators 20092010201120122013
Israeli New Sheqel. (ILS) - Average Annual Exchange Rate For 1 USD 3.933.743.583.863.61

Source: World Bank - Last Available Data.

 
 

Learn more about Market Analyses about Israel on Globaltrade.net, the Directory for International Trade Service Providers.

Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labor freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.

Score:
68.4/100
Position:
Moderately Free
World Rank:
44/178
Regional Rank:
5/15

Distribution of Economic freedom in the world
Source: 2014 Index of Economic freedom, Heritage Foundation

 

Business environment ranking

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:
7.50
World Rank:
20/82

Source: The Economist - Business Environment Rankings 2014-2018

 

Country Risk

See the country risk analysis provided by Coface.

 

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Foreign Trade in Figures

The Israeli economy is extremely open. Trade represents nearly 70% of GDP (average 2009-2011), and exports, the backbone of the country's growth, about 24% of GNP. The trade balance of Israel, before deficit, recorded a record surplus in 2009 due to a sharp drop in imports. The situation was reversed again in 2010.

In 2013, the country's trade deficit diminished by more than 20% compared to 2012 (value in USD), especially due to a drop in imports (reduction in the energy bill) and the recovery of exports (especially hi-tech products).

The main customers and suppliers of Israel are the European Union, the United States, Turkey, Japan, India and China. The main goods imported by the Israeli state are raw materials and half-finished products, hydrocarbons, consumption goods (food products and drinks, electrical equipment, transport equipment, etc.) and investment products. The main national exports are manufactured goods which are often high technology products (computer equipment, electronic components, aeronautics, electronic communication equipment, verification products and pharmaceutical products).

 
Foreign Trade Indicators 20092010201120122013
Imports of Goods (million USD) 49,27861,20975,83075,39274,770
Exports of Goods (million USD) 47,93558,41367,79663,14166,401
Imports of Services (million USD) 16,86518,50820,24220,75119,978
Exports of Services (million USD) 21,96124,75327,39130,85833,123
Imports of Goods and Services (Annual % Change) -13.815.110.72.5-0.1
Exports of Goods and Services (Annual % Change) -11.915.16.50.91.5
Imports of Goods and Services (in % of GDP) 30.733.036.036.131.6
Exports of Goods and Services (in % of GDP) 33.535.035.536.232.9
Trade Balance (million USD) 733-1,903-8,141-9,741-9,329
Trade Balance (Including Service) (million USD) 5,8274,797-1,2964234,165
Foreign Trade (in % of GDP) 64.268.071.472.364.5

Source: WTO - World Trade Organization ; World Bank , Last Available Data

 

Main Partner Countries

Main Customers
(% of Exports)
2013
United States 26.2%
Hong Kong 8.1%
United Kingdom 5.8%
Belgium 4.7%
China 4.3%
See More Countries 51.0%
Main Suppliers
(% of Imports)
2013
United States 11.3%
China 7.9%
Germany 6.5%
Switzerland 6.1%
Belgium 5.3%
See More Countries 62.9%

Source: Comtrade, Last Available Data

 
 

Main Products

- bn USD of products exported in 2013
Diamonds, whether or not worked, but not mounted...Diamonds, whether or not worked, but not mounted or set (excl. unmounted stones for pick-up styluses, worked stones, suitable for use as parts of meters, measuring instruments or other articles of chapter 90) 28.5%
Electronic integrated circuits and microassembliesElectronic integrated circuits and microassemblies 6.1%
Prepared binders for foundry moulds or cores;...Prepared binders for foundry moulds or cores; chemical products and preparations for the chemical or allied industries, incl. mixtures of natural products, n.e.s. 6.0%
Medicaments consisting of mixed or unmixed...Medicaments consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up in measured doses incl. those in the form of transdermal administration or in forms or packings for retail sale (excl. goods of heading 3002, 3005 or 3006) 4.9%
Medicaments consisting of two or more constituents...Medicaments consisting of two or more constituents mixed together for therapeutic or prophylactic uses, not in measured doses or put up for retail sale (excl. goods of heading 3002, 3005 or 3006) 3.9%
See More Products 50.6%
- bn USD of products imported in 2013
Petroleum oils and oils obtained from bituminous...Petroleum oils and oils obtained from bituminous minerals, crude 12.6%
Diamonds, whether or not worked, but not mounted...Diamonds, whether or not worked, but not mounted or set (excl. unmounted stones for pick-up styluses, worked stones, suitable for use as parts of meters, measuring instruments or other articles of chapter 90) 12.5%
Petroleum oils and oils obtained from bituminous...Petroleum oils and oils obtained from bituminous minerals (excl. crude); preparations containing >= 70% by weight of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations, n.e.s.; waste oils containing mainly petroleum or bituminous minerals 5.1%
Motor cars and other motor vehicles principally...Motor cars and other motor vehicles principally designed for the transport of persons, incl. station wagons and racing cars (excl. motor vehicles of heading 8702) 4.5%
Electronic integrated circuits and microassembliesElectronic integrated circuits and microassemblies 2.6%
See More Products 62.7%

Source: Comtrade, Last Available Data

 
See More Products
More imports (Intracen Data)
More exports (Intracen Data)
 
 
 

Main Services

Source: Comtrade, Last Available Data

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Sources of General Economic Information

Ministries
Ministry of Agriculture and Rural Development
Ministry of Foreign Affairs
Ministry of Industry and Trade
Ministry of Communications
Ministry of Construction and Housing
Ministry of Finance
Ministry of Tourism
Ministry of Health
Ministry of Transport
Ministry of Energy and Water Resources
Statistical Office
Central Bureau of Statistics
Central Bank
Bank of Israel
Stock Exchange
Tel-Aviv Stock Exchange
Search Engines
Dapey Reshet
Tapuz
Walla
Economic Portals
Port2Port, Israeli Trade Portal

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Political Outline

Executive Power
The President is Head of the State and he is elected by the Parliament of the country for a seven year term. His role is essentially ceremonial. The President chooses the leader of the party or majority coalition in the parliament to exercise the functions of the Prime Minister, for a four year term. The Prime Minister is head of the government and it is he who holds the executive power, namely the execution of the law and management of current affaire of the country. The Cabinet is chosen by the Prime Minister before being approved by the Parliament.
Legislative Power
The legislative power is Israel is unicameral. The parliament consists of 120 members, elected by universal suffrage universal for a four year term. The parliament can decide to be dissolved by a simple majority, during a censure motion. The Prime Minister cannot directly dissolve the parliament, he cannot veto it. The Israeli citizens have considerable political rights.
Main Political Parties
The Israeli political system is based on proportional representation, which allows having a system with several parties. No one is in a position to solely assume power,which forces them to cooperate to form coalition governments. The main political parties of the country are:
- Kadima: centrist party, which advocates fixing the borders with the future Palestinian State;
- The Workers Party (Havoda): left center zionist political party;
- Le Likoud: right nationalist party which draws its roots from the Zionist movement
- Shas: advocates ultra-orthodox Judaism.
Current Political Leaders
President: Reuven Rivlin (since July 2014) - Likoud
Prime Minister: Binjamin NETANYAHU (since March 2009) as head of the coalition government.
Next Election Dates
Presidential: 2021;
Legislative: 2017.
 

Indicator of Freedom of the Press

Definition:

The world rankings, published annually, measures the violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire sent to partner organizations,150 RWB correspondents, journalists, researchers, jurists and activists of human rights, including the main criteria - 44 in total - to assess the situation of press freedom in a given country. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).

World Rank:
96/180
Evolution:
16 places up compared to 2013

Source: Worldwide Press Freedom Index 2014, Reporters Without Borders

 

Indicator of Political Freedom

Definition:

The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.

Ranking:
Free
Political Freedom:
1/7

Map of freedom 2014
Source: Freedom House

 

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Last Updates: December 2014