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ECONOMIC HIGHLIGHTS 4 th QUARTER 2008 STATE OF ISRAEL MINISTRY OF FINANCE INTERNATIONAL AFFAIRS DEPARTMENT April 2009 International Affairs Department.

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Presentation on theme: "ECONOMIC HIGHLIGHTS 4 th QUARTER 2008 STATE OF ISRAEL MINISTRY OF FINANCE INTERNATIONAL AFFAIRS DEPARTMENT April 2009 International Affairs Department."— Presentation transcript:

1 ECONOMIC HIGHLIGHTS 4 th QUARTER 2008 STATE OF ISRAEL MINISTRY OF FINANCE INTERNATIONAL AFFAIRS DEPARTMENT April 2009 International Affairs Department International Affairs Department

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 2008 Summary 2008 Summary

3 Israel’s Economy: Highly Educated Population. Rapid Development of Technology & High-Tech Industries. Entrepreneurial Culture. Open Economy. High Trade intensity. Main Characteristics

4 Economic Figures GDP and GDP per Capita Major GDP Components Growth: Israel compared to the World Exports of Goods and Services Exports of Goods by Region Foreign Investments Unemployment & Participation Rates Inflation Rate Growth of Main GDP Components 2008 Press for desired slide or continue: Back to Contents Main Indicators and Forecast Main Trading Partners14 Inflation Rate Worldwide Summary5-6

5 2008 Summary Following five years of fast growth, in the second half of 2008 the economy reached a turning point, and the economy went into a recession as a result of the worsening global financial crisis and its increased effects on the local economy. In the first half of the year the economy continued the same trends that had typified the fast growth period: -High level of economic activity -Low rate of unemployment -Surplus of the current account -High savings rate -Reduction in the debt/GDP ratio -High profits in the business sector In the last quarter of the year the economy entered a recession: -Sharp decreases in exports and tax revenues -Reduction in private consumption -Labor market: employment expansion came to a halt, wages fell and unemployment began to rise Source: Bank of Israel, annual report

6 2008 Summary (cont.) Inflation turnaround: Until September – high, as a result of rising world oil and commodities prices and excess demand. After September – dramatic decline as a result of falling world prices and a moderation of the excess demand With the worsening of the global crisis since September and the drop in inflation, the interest rate has been reduced dramatically to an unprecedented level in Israel’s history. The Bank of Israel has purchased considerable sums of foreign currency in order to increase the country’s reserves and as a measure to deal with the accelerated currency appreciation; In February 2009 the Bank of Israel began to purchase government bonds to ease credit conditions. The budget deficit grew and the decline in the debt/GDP ratio slowed as a result of the slowdown in activity and drops in the capital market, which affected tax revenues, and due to further tax reductions. Source: Bank of Israel, annual report

7 *Using public exchange rate. ** In current prices Main Economic Indicators Criteria GDP (current prices in $B)* 4.0%5.4%5.2%5.1%5.0%GDP Real Growth Rate (%) $27,355$26,226$24,271 GDP per Capita (PPP adjusted)** 2.1%3.5%3.3% 3.2% GDP per Capita Growth Rate (%, Current prices) 80.4 (40.3%) 71.2 (43.4%) 62.6 (43.5%) 57.2 (43.0%) 52.0 (41.3%) Exports (Goods & Services)** $B* (As Percentage of GDP) 84.1 (42.2%) 74.0 (45.1%) 62.2 (43.2%) 57.5 (43.2%) 52.1 (41.4%) Imports (Goods & Services)** $B* (As Percentage of GDP) 6.1%7.3%8.4%9.0%10.4%Unemployment Rate (%) 7

8 Criteria 78.3%*79.8%85.5%94.3%98.2%Total Gross Debt (Percentage of GDP) 43.5%44.2%45.0%45.5%47.6% Government Expenditure (Percentage of GDP) 0.8%2.6%5.0%3.2%2.4%Current Account Surplus (% of GDP) 3.8%3.4%-0.1%2.4%1.2%Inflation Rate ( CPI, end of year) Fitch: A (Stable) S&P: A (Stable) Moody’s: A1 (Stable) Credit Rating ( Long-term Foreign Bonds ) About Credit Rating: The government’s credit rating reflects the economy’s 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. Source: Ministry of Finance, Central Bureau of Statistics Main Economic Indicators (con.) 8 * Estimate.

9 GDP and Business GDP (Annual rate of change (%), in Constant Prices) 9 In the past few years, Israel’s economy has enjoyed high growth rates. In light of the world economic crisis, Israel’s growth has slowed down. * Estimate. Source: Ministry of Finance.

10 GDP Growth Israel compared to Advanced Economies* (Annual rate of change (%), in constant prices) * Weighted average: US – 39%, Euro area – 46%, Japan – 3%, UK – 5%, Asian Newly Industrialized countries - 7% Source: Ministry of Finance. Since 2004, Israel’s growth rate has exceeded the average growth rate of advanced economies. 10

11 Major GDP Components (Annual rate of change (%), in constant prices) Source: Ministry of Finance 11 Private Consumption grew by 3.9%. Exports grew by 3.0%. Public Consumption grew by 2.8% in 2008.

12 Source: Central Bureau of Statistics Exports of Goods and Services ( $B ) 12 In 2008, Exports grew by 3.0%

13 Exports of Goods by Region (excluding Diamonds) Source: Central Bureau of Statistics

14 Israel’s Main Trading Partners (US$ Billions, excluding diamonds) Source: Central Bureau of Statistics EXPORT IMPORT 2007 China is becoming a leading trade partner for Israel

15 Net Foreign Investments in Israel (B$) Source: Ministry of Finance 15

16 Unemployment and Participation (As % of Total Labor Force) Source: Central Bureau of Statistics The Acceleration program, announced by the Ministry of Finance, is a package of economic measures designed to accelerate activity in the Israeli economy, with emphasis on the labor market. 16

17 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

18 Inflation Rate Worldwide (Rate of Change in CPI, end of 2007) Inflationary pressures in Israel have decreased, as a result of the world crisis % Sources: Central Bureau of Statistics, OECD

19 Criteria + 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

20 Balances Budget Deficit ; Current Account ; Net Foreign Debt General Government Expenditure Gross Public Debt Gross Tax Burden Back to Contents Press for desired slide or continue:

21 Gross Public Debt (as percentage of GDP) Source: Ministry of Finance Since 2003, the gross public debt has been on a downward trend. 21

22 Source: Ministry of Finance Budget Deficit and General Government Expenditure 22 Budget Deficit General Government Expenditure (% of GDP)

23 Current Account Balance and Net Foreign Debt * As of 30/06/08, 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) 23

24 Source: Ministry of Finance, OECD*As of 2006 Gross Tax Burden (as % of GDP) Tax burden has been in the vicinity of OECD average since OECD countries average: 33.2% *

25 International comparisons and additional data Central Bank Interest Rates NASDAQ and Tel Aviv 100 Indices Israel’s Credit Rating Global Competitiveness Index Global Competitiveness Index: Selected Issues Business Competitiveness Index ; Network Readiness Index Press for desired slide or continue: Back to Contents

26 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 0.5% 0.0% 26 Coinciding with the FED’s low interest rate,BOI interest rate continues to decrease. Coinciding with the FED’s low interest rate, BOI interest rate continues to decrease.

27 NASDAQ & Tel Aviv 100 (monthly average) Source: Tel Aviv Stock Exchange (TASE) and the Ministry of Finance. 27 Tel Aviv 100 reacts to the current events similarly to the NASDAQ, yet less drastically.

28 Source: Credit Rating Agencies, Accountant General Israel’s Credit Rating A1/A+ A2/A A3/A- Baa1/BBB+ Baa2/BBB Baa3 /BBB- 28 In January 2009, The Credit Rating Agencies Moody's and S&P Reconfirmed Israel's Credit Ratings

29 Source: World Economic Forum, Global Competitiveness Index, Global Competitiveness Index, Countries that have been invited for open discussions for joining the OECD Israel Ranks 23 rd out of 134 Countries

30 Global Competitiveness Index, 2008/9 SELECTED CATEGORIES Venture Capital Availability Source: World Economic Forum, Global Competitiveness Index, Availability of Scientists & Engineers Quality of Scientific Research Institutions Company Spending on R&D RANK 30

31 Strength of Investor Protection Source: World Economic Forum; Global Competitiveness Index, Availability of Latest Technologies Utility Patents Legal Rights Index RANK Global Competitiveness Index, 2008/9 SELECTED CATEGORIES 31 (con.)

32 Countries that have been invited for open discussions for joining the OECD Source: World Economic Forum; Global Competitiveness Index (GCI), 2006; Global Information Technology Report *NRI: Measures the level of ICT (Information and Communication Technologies) development of nations [LINK TO SITE][LINK TO SITE] **GCI: Provides a holistic overview of factors critical to productivity and competitiveness [LINK TO SITE][LINK TO SITE] The Networked Readiness Index 2008–2009 Business Competitiveness Index Israel’s Rank in Leading Indices

33 Israel and the OECD Real GDP growth in Unemployment Rate in Press for desired slide or continue: Back to Contents GDP Based on PPP per Capita in

34 Real GDP Growth (Annual percentage of change, partial list) Source and projections: OECD and the Ministry of Finance, Israel 2.6% 1.4% 07’ 08’ The global recession has influenced all of the OECD countries’ growth rates. 5.3% 07’ 4.1% 08’ 34

35 Unemployment Rate (average) Source: OECD, Ministry of Finance 35 08’ 07’ 08’ 07’ 08’ 07’ 08’ 07’ Change 07’-08’

36 GDP per capita based on purchasing-power-parity (PPP) 2007, (in US$) 33,294 25,758 Source: Economics and Research Department calculations from OECD and the Central Bureau of Statistics data 36

37 International Treaties Israel’s 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

38 Israel’s Free Trade Agreements 37 * Member states of the common market of the south, not yet in force European Union (Association Agreement) USA EFTA Canada Turkey Mexico MERCOSUR* QIZ Agreement EgyptJordan

39 Avoidance of Double Taxation Agreements AustriaBelarusBelgiumBrazilBulgariaCanadaChina Czech Republic CroatiaDenmark Estonia * EthiopiaFinlandFranceGermanyGreeceHungaryIndiaIrelandItalyJamaicaJapanLatviaLithuania * The agreement with Estonia has only been signed initially 38

40 (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 39

41 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 40

42 Protection of Investment Agreements 41 CroatiaCyprus Czech Republic El-SalvadorEstoniaGeorgiaGermany AlbaniaArgentinaArmeniaAzerbaijanBelarusBulgariaChina GuatemalaIndiaKazakhstanKoreaLatvia

43 TurkmenistanUkraineUruguayUzbekistan Protection of Investment Agreements (con.) 42LithuaniaMoldovaPolandRomaniaSlovakiaSlovenia South Africa ThailandTurkey

44 International Organization* Memberships: 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) | OECD (candidate) | OPCW (signatory) OSCE (partner) | PCA | UN | UNCTAD | UNECE | UNEP | UNESCO | UNHCR UNIDO | UPU | WCO | WFP | WHO | WIPO | WMO | WTOO WTRO | WTO | ICSID * Economic Organizations 43

45 Relevant Sites Back to Contents Government Institutions: Ministry of Finance OECD Stat 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 OECD Israel International Affairs Department Homepage:

46 We welcome your feedback! Contact: Ms. Ravit Friedberg International Affairs Department Ministry of Finance, Jerusalem, Israel Start Again Click here for our website!


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