Israel’s Economy

Post date: Dec 11, 2011 1:50:22 PM

Israel’s Economy

Israel’s economy is one of the world’s most technologically advanced markets. Already one of the world’s leaders in software development, its rapidly growing high-tech and service sectors include high-tech and biomedical companies and its industrial producers provide transport equipment, chemicals, metal products and processed foods. Israel is one of the world’s centers for diamond cutting and polishing. The United Nations ranks Israel is 17th among 169 nations in the category of “Very Highly Developed” (the Czech Republic is 27th).

Due to its strong commitment to economic development and a work force complimented by constant immigration, growth during Israel’s first two years of existence frequently exceeded an annual rate of 10%. The nation experienced a decade of stagnation following the 1973 Yom Kippur War but a 1985 stabilization plan as well as a series of open-market reforms paved the way for rapid growth during the 1990s, during which nearly one million immigrants arrived from the former Soviet Union. These new Israelis created a wealth of consumers who also played an integral part in the development of Israel’s high-tech sector.

With Israeli companies known for their success in generating funds on Wall Street and in other financial markets, as of 2011 Israel had the largest number of companies listed on the NASDAQ after the USA and Canada. In recent years Israel’s economy has proven itself as resilient and stable due to its developed banking system, labor market elasticity, lack of complex instruments in the capital market and targeted reactions of policy makers. The WEF Global Competitiveness Index ranks Israel as number one in its “Resilience of the Economy” Index. Having long ago fulfilled its membership criteria, Israel became a full member of the OECD in 2010.

Import and Export

The European Union and United States are Israel’s main export partners. Exports of goods and services account for about 40% of the country’s GDP. Israel’s major export commodities are cut diamonds (24.2%), pharmaceutical products (8.9%) and electronic integrated circuits (7.5%). In 2010, exports added up to USD 55.67 billion. Imports were worth USD 58.04 billion for the same year and included raw materials, military equipment, rough diamonds, fuels, grain and investment goods from the US, China and EU.

Import and Export – Czech Republic and Israel

Czech Republic imported goods from Israel were valued at USD 268,651,900 in 2009 and USD 394,427,590 in 2010. Czech exports of goods to Israel totaled USD 132,700,450 in 2009 and USD 149,299,760 in 2010. The below charts illustrate import and export goods.


Israel’s GDP was USD 219.4 billion in 2010 with a USD 29,800 GDP per capita (Czech Republic GDP was USD 261.3 billion in 2010 with a USD 25,600 GDP per capita). The GDP growth rate accelerated to 4.6% in 2010 after modest growth of 0.8% in 2009. The Czech Republic’s GDP, on the contrary, grew 2.3% in 2010 and showed a drop to -4.1% in 2009. 2011 second-quarter figures show positive growth of 0.8% in Israel and 0.1% in the Czech Republic.

Government expenditures have been a large part of Israel’s GDP in past. This was due to several factors that included the need to absorb massive amounts of immigrants, increased security spending and defense expenses, etc. Over the last two decades, however, concurrent with economic reforms, government spending has decreased as percentage of its GDP.


Israel’s parliament, the Knesset, passed its current budget in December 2010. It consists of two parts: the Regular Budget and Development and Capital Account Budget. The latter deals with prospective government investments in separate sectors of the economy. Military expenditures have traditionally been a major fraction of the state budget. Over 13% of budget expenditures are devoted to this sector, which means on average 8% of GDP. This places Israel among the top six countries by share of military expenditures for a nation’s GDP. Charts below represent distribution of Regular Budget funds in 2011.

Israeli Economy Sectors

With scarce natural resources and land that is inhospitable to farming, a young Israel was forced to create a competitive economy with a developed services sector. The country’s industry accounts for a 31.7% market share with agriculture comprising 2.7%, although Israel’s agricultural technologically is very advanced. The most prominent sectors of the Israeli economy include:


With only 2.7% of the country’s GDP and an import rate of approximately 80% of local grain consumption, Israeli agriculture is self-sufficient regarding citrus fruits, Israel’s predominant export article. Israel is also one of the world’s major greenhouse-commodity-exporting nations.

Financial sector

Israel’s venture capital industry emerged in the 1990s. Today it has 70 active venture capital funds, of which 14 international funds have offices in Israel. The developed high-tech sector owes its position to an advanced financial sector as much as a business-incubators in Israel. The country’s domestic financial sector did not experience major failures during the recent financial crisis similar to those experienced in other developed countries. A January 2011, IMF report concluded “banks (in Israel) proved resilient to global downturn and have strengthened further”.

Technology sector

Israel’s science and technology sector is on of the most developed in the world. Israel ranks among the highest globally when measuring number of scientific publications per million citizens. Israeli scientists have contributed to the advancement of agriculture, optics, solar energy, engineering and space exploration. Bill Gates said, “Israel is, by many measures, the country (relative to its population) that has done the most to contribute to the technology revolution.” Diamond industry

Israel is one of the world's three major centers for polished diamonds, alongside Belgium and India. Israel's net polished diamond exports in the first quarter of 2010 jumped 55 percent from 2009, to USD 1.45 billion, after a 37 percent drop in all of 2009 to USD 3.92 billion.Israel’s Economy – A Stable Economy

The strong points underpinning Israel’s economy are a longstanding tradition of upgrading structural reforms, increasing competitiveness, reducing and streamlining the public expenditure as part of its GDP and promoting a responsible and growth-supporting fiscal policy. The numerous comprehensive reforms taken by Israel’s leaders in the fields of taxation, government expenditure and public debt, labor market incentives, infrastructure and public transport and the capital, pension and savings market, as well as measures taken to upgrade the economy and open it up to global trade, have transformed the nation over the past decade into an open, competitive and more stable economy.

The relatively moderate impact of the global crisis on the Israeli economy compared to many other developed countries, and Israel's responsible response to the crisis, as well as the absence of a need for wide-ranging cost-cutting programs such as those currently being implemented in Western countries, also places Israel in an advantageous position compared to other nations.

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