Israel’s Economic Highlights Presentation, Q4 2011

1. STATE OF ISRAEL
MINISTRY OF FINANCE
International Affairs Department
Economic Highlights Presentation
4th Quarter 2011
In any case of information derived from sources external to the Ministry of
Finance, such sources are mentioned at the bottom of each item

2. Table of Contents
1 Main Economic Indicators
2 Balances
3 International Comparisons
4 Israel in the OECD
5 International Agreements
6 Learn More
7 Contact
2

3. Main Economic Indicators
Economic Figures
GDP and Business GDP
Major GDP Components
Exports of Goods and Services
Main Trading Partners
Gross Domestic Capital Formation
Foreign Investments
Unemployment and Participation
Consumer Price Index
Inflation Rate
Israel’s Credit Ratings
3

4. Economic Figures
Criteria 2009 2010 2010 Q4 2011 Q1 2011 Q2 2011 Q3
GDP
189.9 199.0 50.9 51.5 51.9 52.4
(constant prices, 2005, in $B)*
Real GDP growth rate
0.8% 4.8% 7.2% 4.7% 3.5% 3.4%
(% change)
GDP per capita, based on PPP
$28,526 $29,901 -- -- -- --
(Current international $)
GDP per capita growth rate
-0.9% 2.9% 8.6% 5.2% 2.6% 5.3%
(%, 2005 prices)
Exports (goods & services), $B* 75.1 85.3 22.1 22.5 22.6 21.5
(As % of GDP) 39.5% 42.9% 43.4% 43.7% 43.5% 41.0%
Imports (goods & services), $B* 71.0 80.0 20.7 21.9 22.4 22.0
(As % of GDP) 37.4% 40.2% 40.7% 42.5% 43.2% 42.0%
Unemployment rate 7.6% 6.6% 6.5% 6.0% 5.5% 5.6%
* Using a public exchange rate of 1USD=3.7NIS (2010 average)
** Estimated
4
Additional Sources: IMF

5. Economic Figures
Criteria 2005 2006 2007 2008 2009 2010
Public debt
93.8% 84.3% 77.8% 77.1% 79.3% 76.3%
(As % of GDP)
General government expenditure
45.3% 44.7% 43.6% 43.0% 43.0% 42.6%
(As % of GDP)
Current account surplus
3.1% 5.1% 2.9% 0.9% 3.6% 2.9%
(As % of GDP)
Inflation rate
1.4% 2.1% 0.5% 4.6% 3.3% 2.7%
(CPI, yearly average, % change)
Budget deficit
1.8% 0.9% 0.0% 2.2% 5.2% 3.7%
(As % of GDP)
5

6. GDP and Business GDP
Annual rate of change, constant prices, 2005
11%
In 2010, Israel has recovered from the global economic crisis, and is back to previous years’ growth rates. In the 3rd
quarter of 2011, business GDP recovered sharply.
9% 8.6%
7.2%
7% 6.8% 6.8%
6.1% 6.1%
5.6% 5.8%
5.5% 5.3%
5.2%
4.8% 4.9% 4.8% 4.7%
5% 4.5%
4.0%
3.5% 3.4%
3% 2.6%
2.3%
1.5%
1% 0.8%
0.4%
-1%
-0.3% -0.6%
-1.2% -1.0%
-3% GDP Business GDP
6

7. Major GDP Components
Annual rate of change, constant prices, 2005
20%
Global economic crisis
15% 14.5%
13.7%
13.6%
13.1%
10% 9.2%
6.3% 6.6%
5.5%
5% 4.2% 4.4%
3.0% 3.3% 2.8%
2.1% 2.2% 2.2%
1.4% 1.4%
0%
-5%
Private Consumption
-5.8%
Public Consumption
-10%
Investment in Fixed Assets
Exports of Goods and Services -12.5%
-15%
7

8. Exports of Goods and Services
US $ Billions, constant prices, 2005
90
Global economic crisis
80
70 24.09 24.23
60 21.13
21.98
19.27
50 17.45
16.03
40
13.39
30 57.71 56.09
50.29
43.32 46.33
20 39.77
36.66
30.19
10
0
Services Goods
* Using a public exchange rate of 1USD=3.7NIS (2010 average)
8

9. Main Trading Partners
US $ Billions, 2010
8
Imports
7 6.7
20 6.1
18.5 Exports 6
18
5
16 3.7
4
3.2
14
3 2.4 2.2 2.1
12 1.8 1.8 1.8
2
10 1
8 0
6.0
6
4 3.1 2.9
2.3 1.8 1.7 1.3 1.3 1.3
2
0
* Since July 1997 the data on trade with Hong-Kong is added to the data on China
9
Additional Sources: Central Bureau of Statistics

10. Main Trading Partners
US $ Billions, 2010
35.0
Imports
30.0 29.7
26.8 26.5
25.0
22.9
20.0
15.0
13.2 13.0
11.7
10.0 9.8 35.0
8.3 8.7 Exports
6.3 7.3
5.0 30.0
0.0 25.0
2007 2008 2009 2010 19.9 21.9
20.0 17.6 19.6
21.2 18.9
19.2
15.0
15.4 12.9
12.0
10.0 9.6 9.3
Europe 5.0
Asia
0.0
North America 2007 2008 2009 2010
10
Additional Sources: Central Bureau of Statistics

11. Gross Domestic Capital Formation
As % of GDP
21%
20.3%
20%
19.6%
19.2% 19.3%
19% 18.9%
18.0% 18.1%
18% 17.9%
17.6%
17%
16%
11

12. Foreign Investments
US $ Billions
25
20 19.4
17.6
15.3
15 14.4
10.8 10.9 10.7
10 9.5
8.8
8.3
4.9 5.2
5 4.3 4.3 4.4
3.3
2.4
1.6
0
Total Investments Direct Investments
* 2006 is exceptional due to a large acquisition by Teva Pharmaceutical Industries Ltd.
12

13. Unemployment and Participation
As % of total labor force
9% 59%
Since the 2nd quarter of 2009 unemployment is relatively decreasing, hand in hand with a relative
increase in participation rate since the 1st quarter of 2010.
8% 58%
57.7% 57.7%
7.9% 57.5% 57.49% 57.4%
7.6%
7.5% 57.2%
57.0% 7.2%
7% 56.8% 56.8% 56.8% 57%
56.8% 56.7%
6.9%
6.5% 6.6%
6.4% 6.5%
6% 56%
6.0%
5.5% 5.6%
5% 55%
Unemployment Rate
Participation in the Labor Force
4% 54%
Q4 2009 Q1 Q2 Q3 Q4 2010 Q1 Q2 Q3 Q4 2011 Q1 Q2 Q3
13

14. Consumer Price Index
Last 24 monthly averages, 2010=100
105
104 104.1 104.2
104.0 104.0 104.0
103.6 103.7
103 103.1
102.5
102.3
102 102.0
101.8
101.4
101.3
101 101.0
100.8
100.3
100
99.8
99.5
99 99.1 99.1 99.2
98.5
98 98.2 98.3
97
96
95
14
Additional Sources: Central Bureau of Statistics

15. Inflation Rate
Rate of change in consumer price index, yearly average
5%
4.6%
4%
3.3%
3%
2.7%
2.1%
2%
1.4%
1%
0.7%
0.5%
0%
-0.4%
-1%
15

16. Israel’s Credit Ratings
Domestic Bonds Overseas Bonds
Rating Firm Term Forecast
Rating Rating
Long A1 A1
Moody's Stable
Short - P1
Long AA- A+
Standard & Poor's Stable
Short A-1+ A-1
Long A+ A
Fitch Stable
Short - F1
16

17. Table of Contents
1 Main Economic Indicators
2 Balances
3 International Comparisons
4 Israel in the OECD
5 International Agreements
6 Learn More
7 Contact
17

18. International Comparisons
Gross Public Debt
Budget Deficit
General Government Expenditure
Current Account Surplus
Net Foreign Surplus
Gross Tax Burden
18

19. Gross Public Debt
As % of GDP
105%
Since 2003, gross public debt has been on a consistent downward trend, only interrupted by the extraordinary
circumstances surrounding the 2009 global economic crisis.
100% 99.1%
97.4%
95% 93.8%
90%
Global economic crisis
85% 84.3%
80% 79.3%
77.8%
77.1%
76.3%
75%
70%
19

20. Budget Deficit
As % of GDP
6%
5.2% 5.2%
5%
4%
3.7%
3.5%
3%
2.2%
2% 1.8%
1% 0.9%
0.0%
0%
20

21. Budget Deficit
Target and execution in NIS million, current prices
For the first time in its history, Israel enacted a biennial budget for the years 2009-2010. In both years, Israel came in
under budget target. The proven effectiveness and functionality of the biennial budget have led the government to adopt
the biennial budget for a second period through 2011-2012.
0
-3,626 -3,657
-4,862
-6,721 -6,371
-10,000
-16,061 -16,161
-20,000
-30,000
-30,165
-40,000
-39,286
-42,924
-44,355
-50,000 Quarterly Budget Execution Yealy Budget Execution Yearly Budget Target
21

22. General Government Expenditure
As % of GDP
51%
50.1%
50%
49%
48%
47.3%
47%
46%
45.3%
45% 44.7%
44% 43.6%
43.0% 43.0%
43% 42.6%
42%
41%
40%
39%
38%
22

23. Current Account Surplus
As % of GDP
6%
5.1%
5%
4%
3.6%
3.1%
3% 2.9% 2.9%
2.3%
2%
1.2%
1% 0.9%
0%
23

24. Net Foreign Surplus
As % of GDP
30%
26.3% 26.6%
25%
22.5% 22.6%
20%
14.7%
15%
10.9%
10%
5% 4.5%
1.7%
0%
* Using a public exchange rate of 1USD=3.7NIS (2010 average)
24

25. Gross Tax Burden
As % of GDP
37%
36.2%
35.9%
36%
35.5% 35.5% 35.6%
35%
OECD countries average: 34.8%
(2008 average)
34% 33.8%
33%
32.4%
32%
31.4%
31%
30%
25
Additional Sources: OECD

26. Table of Contents
1 Main Economic Indicators
2 Balances
3 International Comparisons
4 Israel in the OECD
5 International Agreements
6 Learn More
7 Contact
26

27. International Comparisons
GDP Growth
Inflation Rates
Israel on IMD Rankings
Israel on WEF Rankings
Interest Rates: Israel & the U.S.
Stock Indices: NASDAQ & Tel-Aviv 100
27

28. GDP Growth
Israel compared to advanced economies, annual rate of change, constant prices
8%
Since 2004, Israel’s growth rate has exceeded the average growth rate of advanced economies.
In 2009, as most of the world experienced a decline in GDP, Israel experienced a 0.8% growth in it’s GDP.
6% 5.6% 5.5%
4.8% 4.9% 4.8%
4.0%
4%
3.1% 3.1% 3.1%
2.7% 2.8%
2%
0.8%
0.1%
0%
-2%
-4% Israel Advanced Economies -3.7%
28
Additional Sources: IMF

29. Inflation Rates
Rate of change in consumer price index, yearly average
4%
The Israeli economy demonstrated high stability compared to other countries throughout the global economic crisis.
3.3%
3%
2.7%
2.4%
2.2%
2%
1.7% 1.6%
1.6% 1.6%
1.4%
1.2%
1%
0.7%
0.1% 0.2%
0%
-0.3%
-0.5%
-1% -0.7%
-0.9%
-1.4%
-1.6%
2009 (dark) 2010 (bright) -1.7%
-2%
29
Additional Sources: IMF

30. Israel on IMD Rankings
IMD World Competitiveness Yearbook 2011
The Institute for Management Development
ranked Israel 17th out of 59 countries for 2011
(Israel was also ranked 17th in 2010)
30
Additional Sources: IMD World Competitiveness Yearbook 2011

31. Israel on IMD Rankings
IMD World Competitiveness Yearbook 2011
Information technology skills Central bank policy
Flexible and adaptability Entrepreneurship
31
Additional Sources: IMD World Competitiveness Yearbook 2011

32. Israel on IMD Rankings
IMD World Competitiveness Yearbook 2011
Total expenditure on R&D (as % of GDP) Scientific research
Venture capital Innovative capacity
32
Additional Sources: IMD World Competitiveness Yearbook 2011

33. Israel on WEF Rankings
World Economic Forum Global Competitiveness Index 2011-2012
The World Economic Forum ranked Israel 22nd
out of 142 countries for 2011-2012
33
Additional Sources: World Economic Forum Global Competitiveness Index 2011-2012

34. Israel on WEF Rankings
World Economic Forum Global Competitiveness Index 2011-2012
Quality of scientific research institutions Venture capital availability
Utility patents per million population Strength of investor protection
34
Additional Sources: World Economic Forum Global Competitiveness Index 2011-2012

35. Israel on WEF Rankings
World Economic Forum Global Competitiveness Index 2011-2012
Government procurement of advanced technology products Capacity for innovation
Firm-level technology absorption University-industry collaboration in R&D
35
Additional Sources: World Economic Forum Global Competitiveness Index 2011-2012

36. Interest Rates: Israel & the U.S.
3.5%
The Bank of Israel was the first in the western world to raise interest since the outburst of the economic crisis. The
rate was raised gradually from 0.5% to 3.25%.
3.25%
3.0%
3.00% 3.00%
2.75%
2.5%
2.50%
2.0%
2.00%
1.75%
1.5%
1.50%
1.25%
1.0%
0.5%
Bank of Israel Federal Reserve =0
0.0%
36

37. Stock Indices: NASDAQ & Tel-Aviv 100
1,500 3,000
Tel Aviv 100 corresponds with the NASDAQ to current events, with relatively stable reactions.
1,400 2,900
1,300 2,800
1,200 2,700
1,100 2,600
1,000 2,500
900 2,400
800 2,300
700 2,200
600 2,100
Tel Aviv 100 NASDAQ
500 2,000
37

38. Table of Contents
1 Main Economic Indicators
2 Balances
3 International Comparisons
4 Israel in the OECD
5 International Agreements
6 Learn More
7 Contact
38

39. Israel in the OECD
Israel was invited as a full member in the OECD on May 10th, 2010, and officially joined in Sep. 10, 2010.
Expenditure on R&D
Real GDP Growth
GDP per Capita
Unemployment
39

40. Expenditure on R&D
As % of GDP, 2010 or latest available year
6%
Israel is 1st in the OECD in expenditure on R&D (research & development) as % of GDP, demonstrating innovation,
development and creativity.
5%
4.25%
4%
3%
2.33%
2%
1%
0%
40
Additional Sources: OECD

41. Real GDP Growth
3-year average, end of period
11%
Israel’s 3-year average growth rate is higher then most OECD members.
10%
9%
8%
7%
6%
5%
4%
3.19%
3%
2%
1%
-0.10%
0%
-1%
-2%
-3%
-4%
-5%
-6%
-7%
41
Additional Sources: OECD

42. GDP per Capita
U.S $, Current prices, PPP, 2010
100,000
90,000
80,000
70,000
60,000
50,000
40,000
34,025
28,510
30,000
20,000
10,000
0
42
Additional Sources: OECD

43. Unemployment Rate
3-year average 2008-2010, or latest available period
25%
Israel’s unemployment rate is in an ongoing downtrend, reaching an historic low level of 5.5% in Q2 2011.
20%
15%
10%
7.7%
7.1%
5%
0%
43
Additional Sources: OECD

44. Table of Contents
1 Main Economic Indicators
2 Balances
3 International Comparisons
4 Israel in the OECD
5 International Agreements
6 Learn More
7 Contact
44

45. International Agreements
Israel’s Free Trade Agreements
Avoidance of Double Taxation
Cooperation in Industrial R&D
Bilateral Investment Treaties
Economic Organizations
45

46. Israel’s Free Trade Agreements
1985 USA QIZ Agreements
1992 EFTA 2004 Egypt
1997 Turkey 1998 Jordan
1997 Canada
1999 Mexico
2000 European Union (Association Agreement)
2007 MERCOSUR
More extended information is available in the Israel Ministry of Finance website
46

47. Avoidance of Double Taxation
Austria Denmark Ireland
Belarus Estonia Italy
Belgium Ethiopia Jamaica
Brazil Finland Japan
Bulgaria France Latvia
Canada Germany Lithuania
China Greece Luxembourg
Czech Republic Hungary Mexico
Croatia India
More extended information is available in the Israel Ministry of Finance website
47

48. Avoidance of Double Taxation
Malta Russia Taiwan
Moldova Singapore Thailand
Norway Slovakia Vietnam
Netherlands Slovenia Turkey
Panama South Africa Ukraine
Philippines South Korea United kingdom
Portugal Spain Uzbekistan
Poland Sweden U.S.A
Romania Switzerland
More extended information is available in the Israel Ministry of Finance website
48

49. Cooperation in Industrial R&D
North America Europe
New York France
Massachusetts Russia (Rusano, Skolkovo)
Maryland Italy
Virginia Germany Asia
Wisconsin Greece China( Shanghai, Jiangsu, Most)
Colorado Czech Republic India
Illinois Bulgaria Taiwan
Oregon Lithuania
BIRD (Foundation) Slovenia SIIRD-Singapore (Foundation)
Ontario CIIRDF (Foundation) Denmark KORIL-RDF-Korea (Foundation)
Hungary
Turkey
South America Portugal
Argentina Finland
Uruguay Sweden Australia
Brazil Ireland (Victoria)
* Through EUREKA (40 country Multilateral
Initiative)
More extended information is available in the Israel Ministry of Finance website
49

50. Bilateral Investment Treaties
Albania Cyprus Hungary
Argentina Czech Republic India
Armenia El Salvador Kazakhstan
Azerbaijan Estonia Korea
Belarus Ethiopia Latvia
Bulgaria Georgia Lithuania
China Germany Macedonia
Croatia Guatemala Moldova
More extended information is available in the Israel Ministry of Finance website
50

51. Bilateral Investment Treaties
Mongolia South Africa
Montenegro Thailand
Peru Turkey
Poland Turkmenistan
Romania Ukraine
Serbia Uzbekistan
Slovakia Vietnam
Slovenia
More extended information is available in the Israel Ministry of Finance website
51

52. Economic Organizations
Membership in main international economic organizations
Israel is a member in leading international economic organizations:
• United Nations Organizations
• United Nations Agencies
• World Bank Group
• International Monetary Fund
• OECD
• Regional Organizations
• Inter-Governmental Organizations
More extended information is available in the Israel Ministry of Finance website
52

53. Table of Contents
1 Main Economic Indicators
2 Balances
3 International Comparisons
4 Israel in the OECD
5 International Agreements
6 Learn More
7 Contact
53

54. Learn More
Visit the Israel Ministry of Finance English
website for more information:
About the Ministry
Economic Overview of Israel
Ministry of Finance publications and reports
Other publications and reports on the Israeli economy
Ministry press releases
54

55. Learn More
Click to open:
Israel Central Bureau of Statistics
Bank of Israel
Ministry of Industry, Trade and Labor
Ministry of Foreign Affairs
Israel Government Portal
55

56. Table of Contents
1 Main Economic Indicators
2 Balances
3 International Comparisons
4 Israel in the OECD
5 International Agreements
6 Learn More
7 Contact
56

57. Contact
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