1. Macro Review for the Knesset Finance Committee Ministry of Finance January 2012

2. 2011 - Summary Growth4.8% Unemployment5.6% Taxes (NIS billions) 211.3 Deficit (GDP percentage points) 3.3% Debt (initial estimate) 74% 2

3. Growth Forecast versus Actual Growth, 2008-2012 *Central Bureau of Statistics estimate 3

4. Euro zone 2011 is based on the first 11 months of the year. Israel 2011 is based on the first three quarters. Global Unemployment Rates 2008-2011 4

5. Investments, 2008-2011 Based on the first three quarters of 2011. 5 Between 2008-2011 investments rose 35%

6. Tax collection in 2011 totaled NIS 211.3 billion compared to a budget forecast of NIS 213.5 billion Gap between Actual Tax Collection and Budget Planning, 2011 6

7. Deficit Ceiling versus Actual Deficit GDP Percentage Points 7

8. Public Debt GDP Percentage Points * Preliminary estimates for 2011 8

9. Share Indices January 2011=100 9 * Index of top 50 shares S&P 500 Tel Aviv 100 Euro Stoxx 50*

10. S&P Credit Rating Israel & Western Europe, 2010-2012 CountryCurrent RatingChange in Rating IsraelA+A+ AustriaAA+ ItalyBBB+ IrelandBBB+ X4 BelgiumAA UKAAA = GermanyAAA = HollandAAA = GreeceCC X12 PortugalBB X5 SpainA FranceAA+ SwedenAAA = * An arrow indicates an increase or decrease of one notch in the credit rating 10

11. Responsible Fiscal Policy Importance:  Economic certainty  Low financing costs (for the government and the business sector)  Fiscal flexibility in a crisis  Credibility of the fiscal policy Conformance to the expenditure framework according to the fiscal rule prescribed by law 11

12. Revised Forecast for 2012 BudgetRevision* Growth forecast4.0%3.2% Tax revenues (NIS billions) 232.3221 Deficit (as percentage of GDP) 2.0%3.4% *Assuming the euro zone does not disintegrate (withdrawal of one country or more) 12