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ECONOMIC HIGHLIGHTS 2 nd Quarter 2009 STATE OF ISRAEL MINISTRY OF FINANCE INTERNATIONAL AFFAIRS DEPARTMENT August 2009 International Affairs Department International Affairs Department Slide 2 Contents Note: You can return to the beginning of each chapter by clicking this symbols on the top of each slide. Economic Figures Economic Figures Balances International Comparisons International Comparisons Israel and the OECD Israel and the OECD International Treaties International Treaties Relevant Sites Relevant Sites Main Characteristics Main Characteristics Slide 3 Back to Contents Main Characteristics Highly Educated Population Rapid Development of Technology & High-Tech Industries Entrepreneurial Culture Open Economy Intense Trade Relations with Numerous Partners Slide 4 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 Press for desired slide or continue: Back to Contents Main Indicators Main Trading Partners Inflation Rate Worldwide Slide 5 *Using public exchange rate. ** In current prices Main Economic Indicators 2009 Q1 2008200720062005Criteria 45.7199.3164.1144.0133.2GDP (current prices in $B)* -3.7%4.0%5.4%5.2%5.1%GDP Real Growth Rate (%) --$27,143$25,974$24,467$22,925 GDP per Capita (PPP adjusted)** --2.2%3.5%3.3% GDP per Capita Growth Rate (%, 2005 prices) 15.2 (33.2%) 79.9 (40.1%) 70.9 (43.2%) 62.5 (43.4%) 57.2 (42.9%) Exports (Goods & Services)** $B* (As Percentage of GDP) 13.8 (30.1%) 84.0 (42.1%) 73.6 (44.8%) 62.0 (43.0%) 57.6 (43.2%) Imports (Goods & Services)** $B* (As Percentage of GDP) 7.6%6.2%7.3%8.4%9.0%Unemployment Rate (%) Slide 6 Source: Ministry of Finance Main Economic Indicators (con.) 2008200720062005Criteria 78.3%79.8%85.5%94.3%Total Gross Debt (Percentage of GDP) 43.4%44.2%45.0%45.5% Government Expenditure (Percentage of GDP) 1.1%2.8%5.1%3.2%Current Account Surplus (% of GDP) 3.8%3.4%-0.1%2.4%Inflation Rate ( CPI, end of year) Slide 7 Source: Ministry of Finance Main Economic Indicators (con.) About Credit Rating: The governments credit rating reflects the economys level of risk and affects banks, companies and financial bodies in the market. The rating creates a ceiling which acts as a benchmark to their bond pricing. Credit rating indicates the macro-economic status of an economy and affects foreign investors decisions whether to invest in the market. Overseas Bonds Forecast Domestic Bonds TermRating Firm Rating A1 Stable A1Long Moody's P1-Short A Stable AA-Long Standard & Poor's A-1A-1+Short A Stable A+Long Fitch F1-Short Slide 8 GDP and Business GDP (Annual rate of change (%), in Constant Prices) In the past few years, Israels economy has enjoyed high growth rates. Despite the current economic crisis, Q2 shows signs of recovery. * Estimate. Source: Ministry of Finance. Slide 9 GDP Growth Israel compared to Advanced Economies* (Annual rate of change (%), in constant prices) * Weighted average: US 39%, Euro area 46.5%, Japan 3%, UK 5%, Asian Newly Industrialized countries 6.5% Source: Ministry of Finance. Since 2004, Israels growth rate has exceeded the average growth rate of advanced economies. Slide 10 Major GDP Components (Annual rate of change (%), in constant prices) Source: Ministry of Finance Slide 11 Exports of Goods and Services ( $B ) Slide 12 Israels Main Trading Partners (US$ Billions, excluding diamonds) Source: Central Bureau of Statistics 2008 EXPORT IMPORT 2007 China is becoming a leading trade partner for Israel Slide 13 Net Foreign Investments in Israel (B$) Source: Ministry of Finance Slide 14 Unemployment and Participation (As % of Total Labor Force) Containment and Breakthrough, Israels Economic Policy, includes Encouragement of employment and job creation through an increase of the Chief Scientists budget, renovation of educational institutions and budgeting of the Investment Encouragement Law. Source: Ministry of Finance Slide 15 Inflation Rate (Rate of Change in CPI, end of year) Source: Central Bureau of Statistics, Ministry of Finance The Consumer Price Index (CPI) grew by 3.8% during 2008. * July 2009 index compared to July 2008 * Slide 16 Inflation Rate Worldwide (Rate of Change in CPI, end of 2008) Inflationary pressures in Israel have decreased, as a result of the world crisis. 3.8% Sources: Central Bureau of Statistics, OECD Slide 17 2008Criteria + 4.0% Real GDP + 4.4% Business GDP + 3.0% Exports + 3.9% Private Consumption + 2.8% Public Consumption + 5.1% Investment in Fixed Assets Source: Ministry of Finance Growth of Main GDP Components 2008 Slide 18 Balances Budget Deficit and General Government Expenditure Current Account and Net Foreign Debt Gross Public Debt Gross Tax Burden Back to Contents Press for desired slide or continue: Slide 19 Gross Public Debt (as percentage of GDP) Source: Ministry of Finance Since 2003, the gross public debt has been on a downward trend. Slide 20 Source: Ministry of Finance Budget Deficit and General Government Expenditure Budget Deficit General Government Expenditure (% of GDP) Slide 21 Current Account Balance and Net Foreign Debt * As percentage of 2007 GDP Source: Ministry of Finance. In 2003, current account turned positive, conversely with the decrease of the net foreign debt. Current Account Surplus (% of GDP) Net Foreign Debt (% of GDP) Slide 22 Source: Ministry of Finance, OECD Gross Tax Burden (as % of GDP) Tax burden has been in the vicinity of OECD average since 2003 OECD countries average: 26.4% (as of 2008) Slide 23 Central Bank Interest Rates Israel vs. U.S.A Source: Bank of Israel (BOI), Federal Reserve Bank of Israel Rate (BOI) U.S. Federal Funds Rate Coinciding with the FEDs low interest rate,BOI interest rate continues to decrease. Coinciding with the FEDs low interest rate, BOI interest rate continues to decrease. Slide 24 NASDAQ & Tel Aviv 100 (monthly average) Source: Tel Aviv Stock Exchange (TASE), World Federation of Exchanges (WFE) Tel Aviv 100 reacts to the current events similarly to the NASDAQ, yet less drastically. Slide 25 Source: World Economic Forum, Global Competitiveness Index, 2008-9 Global Competitiveness Index, 2008-2009 The World Economic Forum Ranked Israel 23 rd Out of 134 Countries Slide 26 Global Competitiveness Index, 2008/9 SELECTED CATEGORIES Venture Capital Availability Source: World Economic Forum, Global Competitiveness Index, 2008-9 Availability of Scientists & Engineers Quality of Scientific Research Institutions Company Spending on R&D RANK Slide 27 Strength of Investor Protection Source: World Economic Forum; Global Competitiveness Index, 2008-9 Availability of Latest Technologies Utility Patents Legal Rights Index RANK Global Competitiveness Index, 2008/9 SELECTED CATEGORIES (con.) Slide 28 Countries that have been invited for open discussions for joining the OECD *GCI:Provides a holistic overview of factors critical to productivity and competitiveness *NRI: Measures the level of ICT (Information and Communication Technologies) development of nations Source: World Economic Forum; Global Competitiveness Index (GCI) 2008-2009, Global Information Technology Report 2008-2009 The Networked Readiness Index 20082009 Business Competitiveness Index 2008-9 Israels Rank in Leading Indices 1 3 6 13 18 25 29 31 39 46 54 59 69 74 Slide 29 Israel and the OECD Real GDP growth in 2007-8 Unemployment Rate in 2007-8 Press for desired slide or continue: Back to Contents GDP Based on PPP per Capita in 2006 Slide 30 Real GDP Growth (Annual percentage of change, partial list) Source: Ministry of Finance, IMF 07 08 As many OECD countries were highly influenced by the recession in 2008, Israel only experienced a relatively mild decay in growth rate. 2007: 5.3% 2008: 4.0% Slide 31 Unemployment Rate (harmonized) Source: OECD, Ministry of Finance 08 07 08 07 08 07 08 07 Slide 32 GDP per capita based on purchasing-power-parity (PPP) 2007, (in US$) 32,752 26,314 Source: OECD Slide 33 International Treaties Israels Free Trade Agreements Avoidance of Double Taxation Agreements Cooperation in Industrial R&D Agreements Protection of Investments Agreements International Organization Memberships Press for desired slide or continue: Back to Contents Slide 34 Israels Free Trade Agreements * Member states of the common market of the south, not yet in force 1985 1992 1997 European Union (Association Agreement) USA EFTA Canada Turkey Mexico MERCOSUR* 1999 2000 2007 QIZ Agreement EgyptJordan Slide 35 Avoidance of Double Taxation Agreements AustriaBelarusBelgiumBrazilBulgariaCanadaChina Czech Republic CroatiaDenmarkEstoniaEthiopiaFinlandFranceGermanyGreeceHungaryIndiaIrelandItalyJamaicaJapanLatviaLithuania * The agreement with Estonia has only been signed initially Slide 36 (con.)SwitzerlandThailand The Netherlands TurkeyUkraine United Kingdom UzbekistanUSALuxembourgMexicoMoldovaNorwayPhilippines Portugal * PolandRomaniaRussiaSingaporeSlovakiaSlovenia South Africa** South Korea SpainSweden * The agreement with Portugal has been recently ratified ** Not yet ratified by South Africa. Avoidance of Double Taxation Agreements Slide 37 Cooperation in Industrial R&D Agreements Belgium Canada China France Hong Kong Italy Netherlands Portugal Spain UK USA Singapore Ireland Sweden Finland Germany IndiaAustria Korea Slide 38 Protection of Investment Agreements CroatiaCyprus Czech Republic El-SalvadorEstoniaGeorgiaGermany AlbaniaArgentinaArmeniaAzerbaijanBelarusBulgariaChina GuatemalaIndiaKazakhstanKoreaLatvia Slide 39 TurkmenistanUkraineUruguayUzbekistan Protection of Investment Agreements (con.) LithuaniaMoldovaPolandRomaniaSlovakiaSlovenia South Africa *appending ratification ThailandTurkey Slide 40 Main International Economic Organizations Membership: Israel is a member in leading Israel is a member in leading international : economic organizations: WBGWBG IMFIMF WTOWTO OECD (candidate)OECD (candidate) A more detailed list: BIS | BSEC (observer) | CE (observer) | CERN (observer) | EBRD | FAO | IADB | IAEA | WBG IBRD, IFC, IDA, MIGA | ICAO | ICC | ICCT (signatory) | ICFTU | IFAD | IFRCS (observer) | ILO | IMF | IMO | Interpol | IOC | IOM | ISO | ITU | OAS (observer) | OECD (candidate) | OPCW (signatory) OSCE (partner) | PCA | UN | UNCTAD | UNECE | UNEP | UNESCO | UNHCR | UNIDO | UPU | WCO | WFP | WHO | WIPO | WMO | WTOO | WTRO | WTO | ICSID Slide 41 Relevant Sites Back to Contents Government Institutions: Ministry of Finance OECD Profile on Israel Bank of IsraelBank of Israel (BOI) Central Bureau of Statistics Israeli Government Portal Israel Securities Authority Ministry of Industry, Trade and Labor www.financeisrael.mof.gov.il International Affairs Department Homepage: Slide 42 We welcome your feedback! Mr. Assaf Luxembourg International Affairs Department Ministry of Finance Jerusalem Israel Start Again Visit our website! www.financeisrael.mof.gov.il Mr. Roni Hershkovitz Acting Director Overseas Economic Information International Affairs Department Ministry of Finance Jerusalem Israel Contact Us! financeisrael@mof.gov.il