economic history of israel (1948 - present)

Economic History of Israel 1948 - Present

An advanced, resilient, innovation-driven and knowledge-based economy

$281B$33,656

Economic History of Israel1948 - Present


US$64.1B US$62.1B


US$64.1B


US$62.1B


Innovative Economy: The Start-Up Nation Israel is known for its unique entrepreneurial and innovative spirit. Israel excels in:

Total Expenditure on R&D as % of GDP

Skilled Labor

Quality of Scientific Research

Entrepreneurship

Venture Capital Availability

Utility Patents per Million


High-Tech Economy: The Silicon Wadi


From Socialism to an Open Market, super Capitalism Smart Government policy enables the Israeli high tech story

OSC Funds

Creation of the VC industry

Incubators

1948 to 1973

The new state possessed- no natural or financial resources, - no monetary reserves, - little economic infrastructure, and - few public services.

Quasi-socialist economy Lack of private ownership of economic entities, including of banks. Histadrut.

1948 to 1973

- Massive capital and inflow of immigration during the 1950s and 1960s.

- The new state had to supply food, clothing, shelter, and employment for its new

citizens; set up civil and community services; and establish an independent foreign

exchange, monetary, and fiscal system.

- Given the shortage of private capital, the burden of dealing with main problems

naturally fell upon the public sector

* Service sector and industrial sector - monopoly in such areas as public transport, bank and insurance and the production and marketing of many agricultural products

1973 to 1985

Significant growth in the government deficit.

- The trade deficit (reached a high of 35 percent in 1973.)

- Increase in defense expenditure (escalated to over 25 percent of GNP)

- Oil crisis (The total direct losses US$12 billion--the equivalent of one year's GNP)

- Increases in spending on domestic welfare programs

“Lost Decade”

1985 - 2008

Stabilization Plan in July 1985 A transformation from unusually heavy government involvement

- Reducing the share of government spending in the GDP - Lessen government involvement in the economy

- Reduction of government debt through a continuous process of economic reforms

1985 - 2008Stabilization Plan in July 1985 A transformation from unusually heavy government involvement

- Public spending (from about 60% to 43%) and

- Public debt (from about 163% to 78%),

- Defense expenditure – from more than 20% of GDP to 10%


- Cutting government spending, raising taxes and abolishing subsidies - The Bank of Israel’s freedom (“Non-Printing” law) - U.S. loans for the financing of defense acquisitions – into grants.

Hyper-inflation (of over 400%) to double-digit inflation (around 20%) by

mid-1986 and eventually to the current price stability


- The beginning of the 1990s was characterized both by a massive wave

of immigration from the Soviet Union - Domestic demand increased dramatically, which led to accelerated

economic growth and a sharp increase in investment. - Acceleration of development in the hi-tech industries, particularly from

the mid-1990s onward.


- This drop to a new plateau was the result of a number of factors - the effect of the wave of immigration on the labor market - a reduction in the dollar prices of imports - a supply surplus in the housing market that reflected a significant

reduction in demand - an increase in the interest rate


- During the period 2001–2003, the country experienced its most serious

recession since the establishment of the State of Israel. - A process of economic growth began and gained momentum from 2004

to 2007. This period was also characterized by growth in per capita

income, a decline in unemployment rates, the achievement of the

government's deficit targets, low inflationary pressures and a strong

banking system.


- Israel emerged from the 2008-09 global crisis

with strong economic growth, a resilient

banking system and unemployment at

historic lows.

- 2008’s trade deficit of $2 billion became

2009’s trade surplus of $5 billion. While other

countries fell deeper into recession, Israel

brushed its shoulders off.

Economic History of Israel 1948 - Present

An advanced, resilient, innovation-driven and knowledge-based economy

economic history of israel (1948 - present)

Economy & Finance