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STATE OF ISRAEL MINISTRY OF FINANCE International Affairs Department ECONOMIC HIGHLIGHTS September 2011, 3 rd Quarter 2011 Click to start

Economic Highlights Presentation, Q3 2011

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Page 1: Economic Highlights Presentation, Q3 2011

STATE OF ISRAEL MINISTRY OF FINANCE

International Affairs Department

ECONOMIC HIGHLIGHTS September 2011, 3rd Quarter 2011

Click to start

Page 2: Economic Highlights Presentation, Q3 2011

Contents

Economic Figures

Balances

International Comparisons

Israel and the OECD

International Agreements

Relevant Sites

Note:

You can return to the beginning

of each chapter by clicking the

emblem of Israel on the top of

each slide.

Contact Us

Page 3: Economic Highlights Presentation, Q3 2011

Economic Figures

GDP and Business GDP

Major GDP Components

Growth: Israel compared to the World

Exports of Goods and Services

Foreign Investments

Unemployment & Participation Rates

Inflation Rate

Growth of Main GDP Components 2008

Main Economic Indicators

Main Trading Partners

Inflation Rate Worldwide

BACK TO CONTENTS

Page 4: Economic Highlights Presentation, Q3 2011

* Using a public exchange rate of 1$ = 3.65 NIS

** Estimated

Main Economic Indicators

2011

Q2

2011

Q1

2010

Q4

2010

Q3 2010 2009 Criteria

52.6 52.2 51.7 50.7 202.0 193.0 GDP

(constant prices, 2005, in $B)*

3.3% 4.6% 7.7% 4.7% 4.7% 0.8% Real GDP Growth Rate

(%)

-- -- -- -- 29,531$ 28,581$ GDP per Capita

(PPP adjusted)

1.6% 2.6% 5.5% 2.7% 2.8% -1.1% GDP per Capita Growth Rate

(%, 2005 prices)

23.1

(43.9%)

23.1

(44.1%)

22.4

(43.4%)

21.9

(43.1%)

86.6

(42.9%)

76.3

(37.7%)

Exports (Goods & Services) $B*

(As Percentage of GDP)

23.0

(43.8%)

22.3

(42.7%)

21.0

(40.6%)

20.1

(39.7%)

81.1

(40.1%)

72.0

(37.3%)

Imports (Goods & Services) $B*

(As Percentage of GDP)

5.5% 6.0% 6.5% 6.6% 6.6% 7.6% Unemployment Rate

Source: Ministry of Finance, IMF

CONTINUE

Page 5: Economic Highlights Presentation, Q3 2011

Source: Ministry of Finance

2010 2009 2008 2007 Criteria

76.3% 79.3% 77.1% 77.8% Total Gross Debt

(% of GDP)

42.6% 43.0% 43.0% 43.6% General Government Expenditure

(Percentage of GDP)

2.9% 3.6% 0.8% 2.9% Current Account Surplus

(% of GDP)

2.7% 3.3% 4.6% 0.5% Inflation Rate

(CPI, yearly average)

CONTINUE

Main Economic Indicators

Page 6: Economic Highlights Presentation, Q3 2011

Source: Ministry of Finance

Overseas Bonds Forecast

Domestic Bonds Term Rating Firm

Rating Rating

A1 Stable

A1 Long Moody's

P1 - Short

A+ Stable

AA- Long Standard & Poor's

A-1 A-1+ Short

A Stable

A+ Long Fitch

F1 - Short

Main Economic Indicators

CONTINUE

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Moody's S&P Fitch

A1/A+

A2/A

A3/A-

Baa1/BBB+

Baa2/BBB

Baa3/BBB-

Aa3/AA-In 2011, S&P upgraded their overseas long term credit rating for Israel to A+.

Also, in 2011 Moody’s and Fitch reaffirmed their credit rating for Israel.

Page 7: Economic Highlights Presentation, Q3 2011

3.3%

4.6%

7.7%

4.7%

5.7%5.4%

4.2%

0.8%

4.7%

1.9%

5.2%5.0%

8.7%

5.4%

0.2%

4.7%

6.0%

7.0%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

2006 2007 2008 2009 2010 2010 Q3 2010 Q4 2011 Q1 2011 Q2

GDP Business GDP

GDP and Business GDP

Annual rate of change, constant prices

In 2010, Israel has recovered from the global In the 4th quarter of 2010, Israel

economic crisis, and is back to previous years’ experienced exceptional growth rates

growth rates

Source: Ministry of Finance.

CONTINUE

Page 8: Economic Highlights Presentation, Q3 2011

GDP Growth Israel compared to advanced economies* (annual rate of change, constant prices)

3.1%

2.7%

3.0%2.7%

0.2%

-3.4%

3.0%

0.8%

4.7%

4.2%

5.4%

5.7%

4.9%5.0%

-3.5%

-2.5%

-1.5%

-0.5%

0.5%

1.6%

2.6%

3.6%

4.6%

5.6%

2004 2005 2006 2007 2008 2009 2010

Advanced Economies Israel Growth

Source: Ministry of Finance, IMF

Since 2004, Israel’s growth rate has exceeded the average growth rate

of advanced economies.

CONTINUE

In 2009, as most of the world experienced a decline in GDP,

Israel experienced a 0.8% growth in it’s GDP

Page 9: Economic Highlights Presentation, Q3 2011

4.3%

6.3%

3.0%

1.4% 1.4%

3.1% 3.1%2.1% 2.2% 2.2%

13.6%14.6%

4.1%

-5.8%

12.6%

5.9%

9.3%

5.9%

-12.5%

13.6%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

2006 2007 2008 2009 2010

Private Consumption Government Consumption Investment in Fixed Assets Exports of Goods and Services

Major GDP Components

Annual rate of change, in constant prices

Source: Ministry of Finance

CONTINUE

In 2010, Investment in Fixed Assets and Export of Goods and

Services recovered sharply, after they were contracted severely in

2009 due to the economic crisis.

Global Economic Crisis

Page 10: Economic Highlights Presentation, Q3 2011

Source: Ministry of Finance

Exports of Goods and Services US $ Billions, current prices

55.7

13.4

16.0

17.4

19.3

21.1

24.1

22.0

24.7

45.957.2

36.7

30.2

39.843.3

50.3

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

2003 2004 2005 2006 2007 2008 2009 2010

Services

Goods

CONTINUE

Global

Economic

Crisis

Page 11: Economic Highlights Presentation, Q3 2011

Israel’s Main Trading Partners

2010, US $ Billions

Source: Central Bureau of Statistics

18.5

6.0

3.1 2.92.3 1.8 1.7 1.3 1.3 1.3

0

2

4

6

8

10

12

14

16

18

20

Exports

CONTINUE *Since July 1997 the data on trade with Hong-Kong is added to the data on China

6.76.1

3.73.2

2.4 2.2 2.11.8 1.8 1.8

0

1

2

3

4

5

6

7

Imports

Page 12: Economic Highlights Presentation, Q3 2011

Israel’s Main Trading Partners

US $ Billions

Source: Central Bureau of Statistics

26.8

29.7

22.9

26.4

11.913.7

10.0

13.3

8.3 8.7

6.37.3

0

5

10

15

20

25

30

CONTINUE

Imports

Exports

19.2

21.9

15.4

18.9

9.8

12.2

9.5

13.8

19.921.2

17.6

19.6

0

5

10

15

20

25

30

North America

Asia

Europe

Page 13: Economic Highlights Presentation, Q3 2011

Net Foreign Investments in Israel US $ Billion

1.6

3.3

2.4

4.3

15.3

8.8

10.9

4.4

5.24.94.3

9.5

8.3

19.4

14.4

10.7 10.7

17.6

0

5

10

15

20

25

2002 2003 2004 2005 2006* 2007 2008 2009 2010

Direct Investments

Total Investments

* 2006 is exceptional due to a large acquisition by Teva Pharmaceutical Industries Ltd

Source: Ministry of Finance

CONTINUE

Global Economic

Crisis

Page 14: Economic Highlights Presentation, Q3 2011

Unemployment and Participation As % of total labor force

7.6%

7.2%

6.9%

6.5%6.6%

6.5%

6.0%

5.5%

56.8%

56.8% 56.7%

57.1%

57.7%

57.7%

57.4% 57.5%

54.5%

55.0%

55.5%

56.0%

56.5%

57.0%

57.5%

58.0%

58.5%

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

Q3 Q4 2010 Q1 Q2 Q3 Q4 2011 Q1 Q2

Unemployment Rate Participation in the Labor Force

Source: Ministry of Finance

CONTINUE

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.

Page 15: Economic Highlights Presentation, Q3 2011

Inflation Rate

Rate of change in CPI, yearly average, 2008=100

Source: Central Bureau of Statistics, Ministry of Finance

0.7%

-0.4%

1.4%

2.1%

0.5%

4.6%

3.3%

2.7%

-1%

0%

1%

2%

3%

4%

5%

2003 2004 2005 2006 2007 2008 2009 2010

CONTINUE

Page 16: Economic Highlights Presentation, Q3 2011

Inflation Rate

Rate of change in CPI, 12 months average, 2008=100

Source: Central Bureau of Statistics, Ministry of Finance

101.0

101.3101.4

101.8102.0

102.3102.5

103.1

103.6

104.0

103.7

104.2

99

100

101

102

103

104

105

Sep 2010 Oct 2010 Nov 2010 Dec 2010 Jan 2011 Feb 2011 Mar 2011 Apr 2011 May 2011 Jun 2011 Jul 2011 Aug 2011

CONTINUE

Page 17: Economic Highlights Presentation, Q3 2011

Inflation Rate Worldwide

Annual rate of change in CPI, 2010

Sources: Ministry of Finance, IMF

CONTINUE

3.3%

-1.4%

-0.9%

2.2%

1.6%

-1.7%

0.2%0.0%

2.7%

0.7%

1.4%

2.4%

1.6% 1.7%

-1.6%

1.2%

2.3%

-0.5% -0.3%-0.7%

-3%

-1%

1%

3%

Isra

el

Japa

n

Switz

erland

Por

tuga

l

Norw

ay

USA

Finland

Ireland

Ger

man

y

Belgium

2009 (left column)

2010 (right column)

The Israeli economy demonstrated a high level of stability

compared to other countries throughout the global economic crisis

Page 18: Economic Highlights Presentation, Q3 2011

Q2 2011 Criteria

+ 3.3% Real GDP

+ 1.9% Business GDP

+ 3.4% Exports

+ 2.2% Private Consumption

- 4.4% Public Consumption

+ 8.8% Investment in Fixed Assets

Source: Ministry of Finance

Growth of Main GDP Components for Previous Quarter

NEXT CHAPTER: BALANCES BACK TO CONTENTS

Page 19: Economic Highlights Presentation, Q3 2011

Balances

Budget Deficit – Target and Execution

Gross Public Debt

BACK TO CONTENTS

Budget Deficit and General Government Expenditure

Gross Tax Burden

Current Account and Net Foreign Debt

Page 20: Economic Highlights Presentation, Q3 2011

Gross Public Debt

As % of GDP

Source: Ministry of Finance

76.3%

79.3%

99.1%

97.4%

93.8%

84.3%

77.8%77.1%

75%

80%

85%

90%

95%

100%

105%

2003 2004 2005 2006 2007 2008 2009 2010

Since 2003, gross public debt has been on a consistent downward trend, only interrupted by the

extraordinary circumstances surrounding the 2009 global economic crisis

CONTINUE

Global

Economic

Crisis

Page 21: Economic Highlights Presentation, Q3 2011

Budget Deficit – Target and Execution in NIS million, current prices

Source: Ministry of Finance

-4,452

-16,061

-39,286

-3626

-6721

-3657

-16161

-30165

-1980

-5975

-42924-44,355-45500

-40500

-35500

-30500

-25500

-20500

-15500

-10500

-5500

-500

2009 Q3 2009 Q4 2009 Total 2010 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Total 2011 Q1 2011 Q2

CONTINUE

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.

Quarterly Budget Execution

Yearly Budget Execution

Yearly Budget Target

Page 22: Economic Highlights Presentation, Q3 2011

Source: Ministry of Finance

Budget Deficit and General Government Expenditure

45.3%

44.7%

43.6%

43.0% 43.0%

42.6%

41%

42%

43%

44%

45%

46%

2 5 2 6 2 7 2 8 2 9 2 1

General Government Expenditure

(% of GDP) 1.8%

0.9%

0.0%

2.2%

5.2%

3.7%

0%

1%

2%

3%

4%

5%

6%

CONTINUE

Budget Deficit

(% of GDP)

Page 23: Economic Highlights Presentation, Q3 2011

Current Account Balance and Net Foreign Debt

Source: Ministry of Finance.

1.2%

2.3%

3.1%

5.1%

2.9%

0.8%

3.6%

2.9%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

2003 2004 2005 2006 2007 2008 2009 2010

Since 2003, the current account balance is positive, and is accompanied by a decrease of net foreign debt

Current Account Surplus (% of GDP)

Net Foreign Surplus*

(% of GDP)

4.4%

10.8%

14.4%

22.1% 22.3%

26.0% 26.2%

1.7%

0%

5%

10%

15%

20%

25%

30%

2003 2004 2005 2006 2007 2008 2009 2010

CONTINUE *Current Prices, using a public exchange rate of 1$ = 3.65 NIS

Page 24: Economic Highlights Presentation, Q3 2011

Source: Ministry of Finance, OECD

Gross Tax Burden as % of GDP

35.5% 35.6%35.9%

36.2%

33.8%

31.4%

32.4%

28%

30%

32%

34%

36%

38%

OECD countries average: 34.8% (2008 average)

NEXT CHAPTER: INTERNATIONAL COMPARISONS BACK TO CONTENTS

Page 25: Economic Highlights Presentation, Q3 2011

International Comparisons

NASDAQ and Tel-Aviv 100 (monthly average)

WEF Global Competitive Index

Central Bank Interest Rates: Israel and U.S.A

BACK TO CONTENTS

IMD World Competitiveness Yearbook

Page 26: Economic Highlights Presentation, Q3 2011

Source: International Institute for Management and Development (IMD), World Competitiveness Yearbook 2011

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)

CONTINUE

Page 27: Economic Highlights Presentation, Q3 2011

Source: International Institute for Management and Development (IMD), World Competitiveness Yearbook 2011

IMD World Competitiveness

Yearbook 2011

CONTINUE

Information technology skills Central bank policy

Entrepreneurship Flexible and adaptability

Page 28: Economic Highlights Presentation, Q3 2011

Source: International Institute for Management and Development (IMD), World Competitiveness Yearbook 2011

IMD World Competitiveness

Yearbook 2011

CONTINUE

Total expenditure on R&D (as % of GDP) Scientific research

Innovative capacity Venture capital

Page 29: Economic Highlights Presentation, Q3 2011

Source: World Economic Forum, Global Competitiveness Index, 2011-2012

The World Economic Forum

ranked Israel

22nd

out of 142 countries

for 2011-2012

CONTINUE

WEF Global Competitiveness

Index 2011-2012

Page 30: Economic Highlights Presentation, Q3 2011

Source: World Economic Forum, Global Competitiveness Index, 2011-2012

CONTINUE

Quality of scientific research institutions Venture capital availability

Strength of investor protection Utility patents per million population

WEF Global Competitiveness

Index 2011-2012

Page 31: Economic Highlights Presentation, Q3 2011

Source: World Economic Forum, Global Competitiveness Index, 2011-2012

CONTINUE

WEF Global Competitiveness

Index 2011-2012

Government procurement of advanced

technology products

Capacity for innovation

University-industry collaboration in R&D Firm-level technology absorption

Page 32: Economic Highlights Presentation, Q3 2011

0.50%

0.75%

1.25%

1.50%

2.00% 2.00%

3.00%

3.25%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

Central Bank Interest Rates: Israel and U.S.A

Source: Ministry of Finance

Bank of Israel Rate (BOI)

U.S. Federal Funds Rate (FED) = 0%

CONTINUE

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%

Page 33: Economic Highlights Presentation, Q3 2011

NASDAQ & Tel Aviv 100 monthly average

1,000.00

1,500.00

2,000.00

2,500.00

3,000.00

3,500.00

4,000.00

9 10 11 12

Jan 20

092 3 4 5 6 7 8 9 10 11 12

Jan 20

102 3 4 5 6 7 8 9 10 11 12

Jan 20

112 3 4 5 6 7 8

300

400

500

600

700

800

900

1000

1100

1200

1300

Nasdaq (left scale) Tel Aviv 100 (right scale)

Source: Ministry of Finance

Tel Aviv 100 corresponds with the NASDAQ to current events

NEXT CHAPTER: ISRAEL AND THE OECD BACK TO CONTENTS

Page 34: Economic Highlights Presentation, Q3 2011

Israel and the OECD

Unemployment

GDP per Capita

Real GDP Growth

Expenditure on R&D

Israel was invited as a full member in the OECD on May 10th, 2010, and officially

joined in September 10th, 2010.

BACK TO CONTENTS

Page 35: Economic Highlights Presentation, Q3 2011

Source: OECD

CONTINUE

2.28%

4.27%

0%

1%

1%

2%

2%

3%

3%

4%

4%

5%Israel is ranked 1st of all OECD countries by expenditure on R&D (research & development)

as a percentage of GDP (4.27 %), demonstrating innovation, development and creativity.

Expenditure on R&D As % of GDP, 2008, or latest available year

Page 36: Economic Highlights Presentation, Q3 2011

Real GDP Growth

3-year average at end of period

Source: OECD

CONTINUE

2.13%

4.83%

0%

2%

4%

6%

8%

10%

12%Israel’s 3-year average growth rate is higher then most OECD members.

For Israel’s year-on-year graph, see slide no.7

Page 37: Economic Highlights Presentation, Q3 2011

GDP per capita Current prices and PPP’s, 2009

Source: OECD

CONTINUE

27,661

33,082

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

For Israel’s adjusted PPP GDP Per Capita, see slide no.4

Although no comparable data for 2010 exists, it is reasonable to assume a diminishing

gap between Israel and the OECD average

Page 38: Economic Highlights Presentation, Q3 2011

Source: Ministry of Finance, OECD

6.8%

8.5%

0%

5%

10%

15%

20%

25%

Israel’s unemployment rate is in an ongoing downtrend, reaching an historic low

level of 5.5% in Q2 2011. During the last global economic crisis, Israel

experienced a relatively mild increase in unemployment rates.

For Israel’s unemployment, see

NEXT CHAPTER: INTERNATIONAL AGREEMENTS BACK TO CONTENTS

Unemployment Rate

2010

slide no.14

Page 39: Economic Highlights Presentation, Q3 2011

International Agreements

Avoidance of Double Taxation Agreements

Bilateral Investment Treaties

Cooperation in Industrial R&D Agreements

International Organization Memberships

Israel’s Free Trade Agreements

BACK TO CONTENTS

Page 40: Economic Highlights Presentation, Q3 2011

QIZ Agreements

Egypt (2004)

Jordan (1998)

Israel’s Free Trade Agreements

1985

1992

1997

1997

1999

2000

2007

USA

EFTA

Turkey

Canada

Mexico

European Union (Association Agreement)

MERCOSUR (Argentina not yet in force)

CONTINUE

Source: Ministry of Finance

Page 41: Economic Highlights Presentation, Q3 2011

Avoidance of Double Taxation Agreements

Source: Ministry of Finance

Austria

Belarus

Belgium

Brazil

Bulgaria

Canada

China

Czech Republic

Croatia

Denmark

Estonia

Ethiopia

Finland

France

Germany

Greece

Hungary

India

Ireland

Italy

Jamaica

Japan

Latvia

Lithuania

Luxembourg

Mexico

CONTINUE

Page 42: Economic Highlights Presentation, Q3 2011

Avoidance of Double Taxation Agreements

Source: Ministry of Finance

Moldova

Norway

Philippines

Portugal

Poland

Romania

Russia

Singapore

Slovakia

Slovenia

South Africa

South Korea

Spain

Sweden

Switzerland

Thailand

Netherlands Turkey

Ukraine

United kingdom

Uzbekistan

U.S.A

Taiwan

Vietnam

Malta

Panama

CONTINUE

Page 43: Economic Highlights Presentation, Q3 2011

Cooperation in Industrial R&D Agreements

Source: MATIMOP

North America

New York Massachusetts Maryland Virginia Wisconsin Colorado Illinois Oregon BIRD(Foundation) Ontario CIIRDF (Foundation)

South America Argentina Uruguay Brazil

Australia (Victoria)

Europe France Russia (Rusano, Skolkovo) Italy Germany Greece Czech Republic Bulgaria Lithuania Slovenia Denmark Hungary Turkey Portugal Finland Sweden Ireland

* Through EUREKA (40 country Multilateral Initiative)

Asia China( Shanghai, Jiangsu, Most) India Taiwan SIIRD-Singapore (Foundation) KORIL-RDF-Korea (Foundation)

CONTINUE

Page 44: Economic Highlights Presentation, Q3 2011

Bilateral Investment Treaties

CONTINUE

Source: Ministry of Finance

Albania

Argentina

Armenia

Azerbaijan

Belarus

Bulgaria

China

Croatia*

India

Kazakhstan

Latvia

Lithuania

Germany

Cyprus

Czech Republic

El Salvador

Estonia

Georgia

Guatemala

Ethiopia

Hungary*

Macedonia*

Korea

Moldova

* The treaty is either under negotiations, pending ratifications, under negotiations for amendment, or terminated, while existing

investments are still protected. See exact comments in the Bilateral Investments Treaties page in our website.

Page 45: Economic Highlights Presentation, Q3 2011

Bilateral Investment Treaties

CONTINUE

Source: Ministry of Finance

South Africa*

Thailand

Turkey

Turkmenistan

Ukraine*

Uzbekistan

Slovakia

Slovenia*

Serbia

Mongolia

Poland

Romania*

Montenegro

Peru*

Vietnam*

* The treaty is either under negotiations, pending ratifications, under negotiations for amendment, or terminated, while existing

investments are still protected. See exact comments in the Bilateral Investments Treaties page in our website.

Page 46: Economic Highlights Presentation, Q3 2011

Main International Economic Organizations Membership:

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

NEXT CHAPTER: RELEVANT SITES BACK TO CONTENTS

Source: Ministry of Finance

Page 47: Economic Highlights Presentation, Q3 2011

Relevant Sites

BACK TO CONTENTS

Ministry of Finance

Bank of Israel

Central Bureau of Statistics

Israeli Government Portal

Israel Securities Authority

Ministry of Industry, Trade and Labor

CONTACT US

Ministry of Foreign Affairs

Page 48: Economic Highlights Presentation, Q3 2011

WE WELCOME YOUR FEEDBACK Mr. Roni Hershkovitz

Director

Overseas Economic Information

International Affairs Department

Ministry of Finance

Jerusalem

Israel

Mr. Assaf Luxembourg

Overseas Economic Information

International Affairs Department

Ministry of Finance

Jerusalem

Israel

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