Economy of Israel
|
|
Template:Israelis Israel has a diversified modern economy with substantial government ownership and a rapidly developing high-tech sector. Poor in natural resources, Israel depends on imports of oil, coal, food, uncut diamonds, other production inputs, and military equipment. Its GDP in 1997 reached $98 billion, or $16,800 per person. The major industrial sectors include metal products, electronic and biomedical equipment, processed foods, chemicals, and transport equipment. Israel possesses a substantial service sector and is one of the world's centers for diamond cutting and polishing. It is also a world leader in software development and is a major tourist destination.
Israel's strong commitment to economic development and its talented work force led to economic growth rates during the nation's first two decades that frequently exceeded 10% annually. The years after the 1973 Yom Kippur War were a lost decade economically, as growth stalled and inflation reached triple-digit levels. The successful economic stabilization plan implemented in 1985 and the subsequent introduction of market-oriented structural reforms reinvigorated the economy and paved the way for its rapid growth in the 1990s.
Two developments have helped to transform Israel's economy since the beginning of the decade. The first is the wave of Jewish immigration, predominantly from the countries of the former U.S.S.R., that has brought some 841,000 new citizens to Israel. These new immigrants, many of them highly educated, now constitute some 16% of Israel's 5.9 million population. Their successful absorption into Israeli society and its labor force forms a remarkable chapter in Israeli history. The skills brought by the new immigrants and their added demand as consumers have given the Israeli economy a strong upward push.
The second development benefiting the Israeli economy is the Mideast peace process begun at the Madrid conference of October 1991, which led to the signing of accords between Israel and the Palestinians and a peace treaty between Israel and Jordan. The peace process has helped to ease Israel's economic isolation from its neighbors and has begun a process of regional economic integration that may help to stabilize the region. It has also opened up new markets to Israeli exporters farther afield, such as in the rapidly growing countries of East Asia. The peace process has stimulated an unprecedented inflow of foreign investment in Israel, as companies that formerly shunned the Israeli market now see its potential contribution to their global strategies.
Israeli companies, particularly in the high-tech area, have recently enjoyed considerable success raising money on Wall Street and other world financial markets; Israel now ranks second among foreign countries in the number of its companies listed on U.S. stock exchanges.
Economic growth slowed considerably over the last 2 years, to 4.4% in 1996 and only 1.9% in 1997. Per capita income fell slightly in 1997 for the first time in the previous 10 years. The slowdown is generally attributed to setbacks in the peace process, the waning of the beneficial effects of immigration, labor shortages in high-tech industries, tighter fiscal and monetary policy, and the Asian financial crisis which began in late 1997.
The United States is Israel's largest trading partner; two-way trade totaled some $12.6 billion in 1997. The principal U.S. exports to Israel include computers, integrated circuits, aircraft parts and other defense equipment, wheat, and automobiles. Israel's chief exports to the U.S. include cut diamonds, jewelry, integrated circuits, printing machinery, and telecommunications equipment. The two countries signed a free trade agreement (FTA) in 1985 that progressively eliminated tariffs on most goods traded between the two countries over the following ten years. An agricultural trade accord was signed in November 1996, which addressed the remaining goods not covered in the FTA. Some non-tariff barriers and tariffs on goods remain, however. Israel also has trade and cooperation agreements in place with the European Union and Canada, and is seeking to conclude such agreements with a number of other countries, including Turkey, Jordan and several countries in Eastern Europe.
Until the last decade, Israel's trade with the Arab world was minimal due to the Arab League boycott. Beginning in 1945, Arab nations not only refused to have direct trade with Israel (the primary boycott), but they also refused to do business with any corporation that operated in Israel, or any corporation that did business with a corporation that did business with Israel (the secondary and tertiary boycotts).
Israel is one of the world's major exporters of military equipment, accounting for 10% of the world total in 2003.
Statistics
GDP: purchasing power parity - $120.9 billion (2003 est.)
GDP - real growth rate: 1.3% (2003 est.)
GDP - per capita: purchasing power parity - $19,800 (2003 est.)
GDP - composition by sector: agriculture: 2.8% industry: 37.7% services: 59.5% (2003 est.)
Investment (gross fixed): 17.2% of GDP (2003)
Population below poverty line: 18% (2001 est.)
Household income or consumption by percentage share: lowest 10%: 2.4% highest 10%: 28.3% (1997)
Distribution of family income - Gini index: 35.5 (2001)
Inflation rate (consumer prices): 0.7% (2003 est.)
Labor force: 2.61 million (2003 est.)
Labor force - by occupation: agriculture, forestry, and fishing 2.6%, manufacturing 20.2%, construction 7.5%, commerce 12.8%, transport, storage, and communications 6.2%, finance and business 13.1%, personal and other services 6.4%, public services 31.2% (1996)
Unemployment rate: 10.7% (2003 est.)
Budget: revenues: $44.98 billion expenditures: $51.07 billion, including capital expenditures of NA (2003)
Public debt: 108.6% of GDP (2003)
Agriculture - products: citrus, vegetables, cotton; beef, poultry, dairy products
Industries: high-technology projects (including aviation, communications, computer-aided design and manufactures, medical electronics), wood and paper products, potash and phosphates, food, beverages, and tobacco, caustic soda, cement, diamond cutting
Industrial production growth rate: -0.6% (2003 est.)
Electricity - production: 42.24 billion kWh (2001)
Electricity - consumption: 37.82 billion kWh (2001)
Electricity - exports: 1.457 billion kWh (2001)
Electricity - imports: 0 kWh (2001)
Oil - production: 80 barrel/d (13 m³/d) 2001 est.
Oil - consumption: 260,000 barrel/d (41,000 m³/d) 2001 est.
Oil - exports: NA (2001)
Oil - imports: NA (2001)
Oil - proved reserves: 1.92 million barrels (305,000 m³) 1 January 2002
Natural gas - production: 10 million m³ (2001 est.)
Natural gas - consumption: 10 million m³ (2001 est.)
Natural gas - exports: 0 m³ (2001 est.)
Natural gas - imports: 0 m³ (2001 est.)
Natural gas - proved reserves: 20.81 km³ (1 January 2002)
Current account balance: $-174 million (2003)
Exports: $29.32 billion f.o.b. (2003 est.)
Exports - commodities: machinery and equipment, software, cut diamonds, agricultural products, chemicals, textiles and apparel
Exports - partners: US 38.4%, Belgium 7.4%, Hong Kong 4.8% (2003)
Imports: $32.27 billion f.o.b. (2003 est.)
Imports - commodities: raw materials, military equipment, investment goods, rough diamonds, fuels, grain, consumer goods
Imports - partners: US 15.6%, Belgium 9.3%, Germany 8%, UK 6.7%, Switzerland 6.1%, Italy 4.1% (2003)
Reserves of foreign exchange & gold: $26.32 billion (2003)
Debt - external: $70.97 billion (2003 est.)
Economic aid - recipient: $662 million from US (2003 est.)
Currency: new Israeli shekel (ILS); note - NIS is the currency abbreviation; ILS is the International Organization for Standarization (ISO) code for the NIS
Currency code: ILS
Exchange rates: new Israeli shekels per US dollar - 4.5541 (2003), 4.7378 (2002), 4.2057 (2001), 4.0773 (2000), 4.1397 (1999)
Fiscal year: calendar year