israel's economy march 2011
TRANSCRIPT
-
8/7/2019 Israel's Economy March 2011
1/39
Overview of Israels EconomyOverview of Israels Economy
Economic Mission,Economic Mission, EmbassyEmbassy of Israel, Washingtonof Israel, Washington DCDC March 2011
Government of IsraelGovernment of Israel
Ministry of FinanceMinistry of Finance
-
8/7/2019 Israel's Economy March 2011
2/39
2
Facts & FiguresFacts & Figures
GDP (2010)
USD 226 billion
GDP per capita (2010)
USD 29.6k
GDP Growth rate2007 - 5.2%2008 - 4.2%2009 - 0.8%2010 - 4.5%
Economy
Advanced industrializedExport-led market economyMember of OECD (June 2010)
Area
21,500 sq km
Source : Israel Central Bureau of Statistics
-
8/7/2019 Israel's Economy March 2011
3/39
3
Comparing Israel with the USComparing Israel with the US
IsraelIsrael The U.S.The U.S. Israel/U.S.Israel/U.S.
GDPGDP
(2010)
$226 billion $14,600 billion 1.5%
GDP per capitaGDP per capita
(2010)
$29,600 $47,40062%
Annual BudgetAnnual Budget
(2012)
$100 billion $3,700 billion 2.7%
Source: Israel Ministry of Finance US CIA world facts book
-
8/7/2019 Israel's Economy March 2011
4/39
Steady GrowthSteady Growth
Discussion OutlineDiscussion Outline
33
44
Sound Monetary PolicySound Monetary Policy55
Responsible Fiscal PolicyResponsible Fiscal Policy
Business InnovationBusiness Innovation11
Global ReputationGlobal Reputation22
4
-
8/7/2019 Israel's Economy March 2011
5/39
5
SomeSome AmericansAmericans havehave comecome toto thethe MiddleMiddle-- EastEast
lookinglooking forfor oiloil.. WeWe havehave comecome toto thethe MiddleMiddle EastEast
lookinglooking forfor brainsbrains andand wewe stoppedstopped atat IsraelIsrael
WarrenWarren BuffetBuffet
BerkshireBerkshire HathawayHathaway
-
8/7/2019 Israel's Economy March 2011
6/39
5
Israel is a Leader in Business InnovationIsrael is a Leader in Business Innovation
65 Israeli companies are traded on NASDAQ* - More than all European Countries combined More than India, Japan and Korea combined
Venture capital investment per capita in Israel*- 2.5 times more than the U.S. 6 times more than the United Kingdom
* Dan Senor, Start-Up Nation: The Story of Israel's Economic Miracle
The StartThe Start--Up NationUp Nation
Source : WEF Global Competitiveness Report 2008-2009
0
20
40
60
80
100
120
140
1 1 12 2 2 3 4 4 5 7
44
65
124
-
8/7/2019 Israel's Economy March 2011
7/39
Israeli technology is essential to many of the applications used daily byIsraeli technology is essential to many of the applications used daily by
millions such as:millions such as:
PC-Pentium developed by Intel Israel
Enterprise network security Checkpoint
World leader in generic drugs Teva
Advanced voicemail systems, based on Comverse's technology
Billing systems for telephone companies designed by Amdocs
Pioneering instant messaging ICQ
Flash data storage - M-Systems (SanDisk)
Medical devices and biotech (Given Imaging, Medinol, Proneuron)
Israeli Technology and the WorldIsraeli Technology and the World
Source : Israel Venture Association7
-
8/7/2019 Israel's Economy March 2011
8/39
7
Israel Is a World Leader in Science, Technology, and InnovationIsrael Is a World Leader in Science, Technology, and Innovation
Source : IMD Global Competitiveness Yearbook 2008-2009
Civilian R&D as % of GDP
0.0
1.0
2.0
.0
4.0
5.0
6.0
Israe
l
SwedenFi
nland
KoreaJapan
Switzerland U
S
AustriaDe
nmark
German
y
OEC
DAvg
France
AustrailiaCa
nada
Belgium U
K
Netherlands
Norway
Luxe
mbourg
CzechRe
publicIrelan
d
Spain
NewZe
alandPo
rtuga
l
Italy
Ranked 1st for totalexpenditure on R&D
Ranked 3rd for Registered
Patents Per Capita
Ranked 3rd for Quality ofScientific Research
Organizations
Leads the world in NobelLaureates per capita.
-
8/7/2019 Israel's Economy March 2011
9/39
9
Israel is a pioneer and world leader in commercialization ofIsrael is a pioneer and world leader in commercialization of
academicacademic innovation:innovation:
12 Tech transfer companies in universities since 1956 (Yeda) and1964 (Yissum)
60-70% of the University tech transfer patenting activity is in the Life, Biotech
and Biomedical Sciences
Revenues from licensing is more than $10 billion and are among the highestin the world.
Yeda ranked # 3 and Yissum # 15 worldwide in terms of revenues.
Israel Is a World Leader in Science, Technology, and InnovationIsrael Is a World Leader in Science, Technology, and Innovation
-
8/7/2019 Israel's Economy March 2011
10/39
Steady GrowthSteady Growth
Discussion OutlineDiscussion Outline
33
44
Sound Monetary PolicySound Monetary Policy55
Responsible Fiscal PolicyResponsible Fiscal Policy
Business InnovationBusiness Innovation11
Global ReputationGlobal Reputation22
10
-
8/7/2019 Israel's Economy March 2011
11/39
A Member of the OECDA Member of the OECD
Implications derived from Israel's accession to the OECD:
International recognition of the quality of the Israeli economic policy
Attraction of foreign investors who rely on the "quality stamp"
provided by the OECD.
A positive influence on Israel's credit rating.
11
Israel is a member of OECD (JuneIsrael is a member of OECD (June 20102010))
-
8/7/2019 Israel's Economy March 2011
12/39
12
Main IndicesMain Indices 1010 Years Accumulated Returns (Years Accumulated Returns (20002000--20092009))
Israel presents a unique investment opportunityIsrael presents a unique investment opportunity
Combining emerging market growth with western market standardsCombining emerging market growth with western market standards
Source : Bloomberg
-
8/7/2019 Israel's Economy March 2011
13/39
30
32
34
36
38
40
42
44
46
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Imports
Exports
Openness of the Israeli EconomyOpenness of the Israeli Economy(percentage of GDP,(percentage of GDP, 19951995--20092009))
Source: Central Bureau of Statistics13
-
8/7/2019 Israel's Economy March 2011
14/39
14
50%
0%
40%
30%
20%
10%
33%
39%
16% 16% 14%12%
7%
5%
ExportExport ofof GoodsGoods andand ServicesServices as % of GDP (as % of GDP (20092009))
Export as % of GDP grew fromExport as % of GDP grew from 1313%% toto 3939%% betweenbetween 19951995 andand 20102010 fromfrom
Openness of the Israeli EconomyOpenness of the Israeli Economy
Source : IMF, OECD, CIA, CBS
-
8/7/2019 Israel's Economy March 2011
15/39
Israels Trade PartnersIsraels Trade Partners -- Imports and Exports of GoodsImports and Exports of Goods (excl. diamonds)*(excl. diamonds)*
Free Access to Key Global MarketsFree Access to Key Global Markets
Exports Imports
Free Trade Agreements
Source: Central Bureau of
Asia
20%
O rs+
21%
Eur an
Union
33%
N. America
26%
N. America
10%
European
Union
33%
O ers+
35%Asia
22%
*As of January, 2010+ Others include: Central / South America, Africa andOceania
15
-
8/7/2019 Israel's Economy March 2011
16/39
Selected International TechnologySelected International TechnologyFirmsFirms IInvestednvested in Israelin IsraelSelected IsraeliSelected Israeli BasedBased CCompaniesompanies
GlobalGlobal ReputationReputation
Source: Central Bureau of Statistics16
-
8/7/2019 Israel's Economy March 2011
17/39
Choice for Many Investors and Industry GiantsChoice for Many Investors and Industry Giants
17
Safra CatzPresident Oracle
Israel is an incredible source of
entrepreneurship and brilliant ideas
Bill Gates
Chairman Microsoft
.. The kind of innovation going on in Israel
is critical to the future of the technology
business . . . For Microsoft, having an R&D
center in Israel has been a great experience .
. . The quality of people here is fantastic."
Warren Buffet
President & CEO Berkshire Hathaway
weve invested $4Bn into a company based
here and its the only investment weve ever
made outside the US
Richard Nottenburg
ChiefStrategy Officer Motorola
Israel is an incredible
opportunity for us. It provides a growth
engine for innovation,
Michael R. Splinter
President & CEO Applied Materials
"The Israeli unit is an inseparable part of the
company and enables us to provide the
technological advantage that differentiates
us from our competitors and enables us to
expand our market share"
Stephen R. BolzePresident & CEO GE Healthcare
.. One of the Hi Tech centers of the worldwe see is in Israel,
-
8/7/2019 Israel's Economy March 2011
18/39
Choice for Many Investors and Industry GiantsChoice for Many Investors and Industry Giants
18
Henning Kagermann
CEO SAP
Israel has a very advanced technology
sector. Innovative Israeli softwarecompanies fit well into SAP's long-standing
organic growth strategy. With a current staff
of around 800 SAP employees in Israel, the
country is home to our fourth largest
development center and SAP remains
strongly committed to its operations here."
Buell Duncan
General Manager, ISV & Developer
Relations, IBM
"Israel is the most exciting place I know. Its
great to come here and see the dynamic
generation of ideas, the motivation to be first
and the professional daring of Israeli start-
ups
Dr. Heinrich Von Pierer
CEO & Chairman Siemens
"We find in Israel many leading
technologies. This is an excellentcombination: High-Tech coming from Israel
and access to international markets
provided by German companies.
Clifford Meltzer
Senior VP Network Management Technology
Group Cisco Systems
There are projects for which it wont matter
if tens of thousands of engineers work on it
or if a group of 100 engineers with a range of
talents do all the work. Israel has such
groups.
-
8/7/2019 Israel's Economy March 2011
19/39
Steady GrowthSteady Growth
Global ReputationGlobal Reputation
Discussion OutlineDiscussion Outline
22
33
44
Sound Monetary PolicySound Monetary Policy55
Responsible Fiscal PolicyResponsible Fiscal Policy
Business InnovationBusiness Innovation11
19
-
8/7/2019 Israel's Economy March 2011
20/39
6.5%
5.6%
2.9%
4.3%
3.3%
9.2%
0.0%
-0.7%
1.5%
5.0%5.1%5.3%5.2%
4.2%
0.8%
4.5%
3.8%4.0%
-2%
0%
2%
4%
6%
8%
10% Average Growth 1950-1972: 10.2%
Average Growth 1973-2008: 4.1%
*2010 Official BOI Forecast
GDP GrowthGDP GrowthAnnual Percent ChangeAnnual Percent Change
4.0%
0.9% 0.8%
-7.5%
-3.7%-4.1%
-3.0%
0.5%
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
Israel* Ireland Spain E U Avg
2008 2009
Source: Central Bureau of Statistics and European Commission for EU Members20
-
8/7/2019 Israel's Economy March 2011
21/39
21
GDP GrowthGDP GrowthAnnual Percentage Change,Annual Percentage Change, 20102010
8 2
6 2
5 2 5 04 54 4
3.7 3.53.33.0 2.8 2.72.7 2.7
2.2 2.22.1 2.0 1.81.7 1.7 1.6 1.51.0
0.5
-3.6-3.9
-0.3-0.2
-
-u
k h
Mx
S
dn
pn n
Au tnd
*t Fin
nd
nitdSt
t
Sitz
nd
n
k
Z
nd ium
Aust
ia
Unitd
ind
m
Euroarea
Netherla
nds
Fran
e
Portug
alIta
ly
Norw
ay
Spa
in
Ireland
Iceland
reece
* Weighted average; Source: OECD Economic Outlook, Israel growth figure is CBS estimate.
-
8/7/2019 Israel's Economy March 2011
22/39
2010
2010Per
Capita
Per
CapitaGDP
GDP
((CurrentPric
es,USDollars)
CurrentPric
es,USDollars)
GDP
GDPP
er
P
erCapita
Capita
Source:IMF,2
010
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
Swit
it St t s
Finland
F anc
Japan
Germany
Greece
Israel
Slovenia
Port al
Malta
Czech Republic
Korea
Slovak Republic
Estonia
Hungary
Poland
Lithuania
Latvia
Russia
-
8/7/2019 Israel's Economy March 2011
23/39
8.9% 8.7%
9.3%
10.3%
10.8%
10.3%
9.0%8.4%
7.3%
6.1%
7.6%
6.3%
53%
54%
55%
56%
5%
7%
9%
11%
Unemployment rates(left axis)
Unemployment and Participation RatesUnemployment and Participation Rates
Participation rates
(right axis)
6.1 6.0
7.07.6
11.7
17.9
9.1
11.3
0.0
5.0
10.0
15.0
20.0
Israel Ireland Spain EU Avg
2008 2009
Source: Bank of Israel and European Commission for EU Members23
-
8/7/2019 Israel's Economy March 2011
24/39
Global ReputationGlobal Reputation
Responsible Fiscal PolicyResponsible Fiscal Policy
Business InnovationBusiness Innovation
Discussion OutlineDiscussion Outline
22
33
44
Sound Monetary PolicySound Monetary Policy55
Steady GrowthSteady Growth11
24
-
8/7/2019 Israel's Economy March 2011
25/39
Government E penditureGovernment E penditure
General Government ExpenditureGeneral Government Expenditure(% of GDP)(% of GDP)
42.9
42.0
46.8
42.9
46.9
45.2
50.4
41.1
3
Source: Bank of Israel and Ministry of Finance Projections and European Commission for EU25
-
8/7/2019 Israel's Economy March 2011
26/39
Budget DeficitBudget Deficit
Source: Bank of Israel, 2009
Government Budget DeficitGovernment Budget Deficit(%(% ofof GDP,GDP, 20002000--20102010))
3
00
0
100
10
200 200
26
0.6%
4.1%
3.5%
5.2%
3.5%
1.8%
1.0%
0.0%
2.2%
5.2%
3.7%
6.0%
5.5%
3.0%
2.0%
1.0%
1.5%
0%
1%
2%
3%
4%
5%
6%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Budget Deficit
Ceiling
-
8/7/2019 Israel's Economy March 2011
27/39
27
Gross Public Debt as a % of GDP
100.699.9
101.3
95.3
85.1
89.9
97.6
99.9
98.2
94.3
85.5
78.377.1
79.6
76.6
97.4 96.8
98.4
92.6
82.6
87.4
95.1
97.496
92.2
83.5
76.475.4
77.9
75
65
70
75
80
85
90
95
100
105
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Public Debt Central Gov. Debt
Source: Ministry of Finance and Bank of Israel *Estimate Ministry of Finance
-
8/7/2019 Israel's Economy March 2011
28/39
-50
0
50
100
150
200
Japan
Iceland
Italy
Greece
Belgium
Spain
USA
Portugal
Hungary
Canada
UK
Germany
Ireland
Israel
Austria
Netherlands
OECDAVG
France
Poland
Norway
Sweden
CzechRepublic
Finalnd
Denmark
Switzerland
Solvania
Korea
NewZealand
Luxembourg
Austrailia
The Increase in Public Debt as a Percentage of GDPThe Increase in Public Debt as a Percentage of GDP
The 60%Maastrict
Level
2007 2010
Source: OECD, Ministry of Finance -Research Division28
The rise in the Israeli public debt is relatively moderate.The rise in the Israeli public debt is relatively moderate. The current publicThe current public
debtdebt--GDP ratio is close to OECD average.GDP ratio is close to OECD average.
-
8/7/2019 Israel's Economy March 2011
29/39
29
2010 2011 2012 2013 2014 2015 2016
Ma imum marginal
income ta45% 45% 44% 43% 42% 41% 39%
Corporate ta 25% 24% 23% 22% 21% 20% 19%
Ta PolicyTa Policy
-
8/7/2019 Israel's Economy March 2011
30/39
19841988 19881992 19921996 2006200919961999 19992001 20012005
ProPro--MarketMarket ReformReform PoliciesPolicies
1998: Foreign
Currency
Liberalization
19971998: Boost of
Privatizations
2003: Government
Cutbacks, Tax
Reform, Second
Pension Reform
1990: Successful
absorption of massive
immigration enhances
growth
1985: Stabilization
Program
1995: First
Pension Reform
1995: First Sovereign
Intl Debt Issuance
2000-2001: Capital
Market Opening and
Structural
Reforms, Debt Burden
Reduction
20062009: Capital
Markets
Reforms, Fiscal
Tightening, Financial
Stimulus Package
Unity
Government
Left Wing
Government
Left Wing
Government
Centrist
Government
ight Wing
Government
ight Wing
Government
ight Wing
Government
30
-
8/7/2019 Israel's Economy March 2011
31/39
-
8/7/2019 Israel's Economy March 2011
32/39
Source: Bank of Israel
YearYear--End Inflation RateEnd Inflation Rate Central Banks Key Interest RateCentral Banks Key Interest Rate
0
2
4
6
8
10
1/03
1/04
1/05
1/06
1/07
1/08
1/09
1/10
Today = 1.25%
Inflation is Under ControlInflation is Under Control
0.0
1.4
6.5
-1.9
1.2
2.4
-0.1
3.4 3.83.9
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
32
-
8/7/2019 Israel's Economy March 2011
33/39
Current Account Has Been in Surplus Seven Years DespiteCurrent Account Has Been in Surplus Seven Years DespiteStrength of the ShekelStrength of the Shekel
-
-
--
-
-
-
-
-
-
--
-6%
-5%
- %
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
8%
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Current Account BalanceCurrent Account Balance(%(% ofof GDP)GDP)
The Shekel vs. USD, EuroThe Shekel vs. USD, EuroEuro USD
3.5
4.0
4.5
5.0
5.5
6.0
6.5
Jan-08
Feb-08
Mar-08
Apr-08
May-08
Jun-08
Jul-08
Aug-08
Oct-08
Nov-08
Dec-08
Jan-09
Mar-09
Apr-09
May-09
Jun-09
Jul-09
Sep-09
Oct-09
Nov-09
Dec-09
2.8
3.1
3.4
3.7
4.0
4.3
4.6
Euro Dollar
Source: Reuters and the Bank ofIsrael
33
-
8/7/2019 Israel's Economy March 2011
34/39
27
Bank of Israels Foreign E change Reserves ClimbedBank of Israels Foreign E change Reserves Climbed
Sharply inSharply in 20092009
60.6
27.228. 29.0
42.
29.6
10.0
20.0
30.0
40.0
50.0
60.0
70.0
2004 2005 2006 2007 2008 2009
X Reserves S$ Billions)
Source: Bank of Israel Reserves as of the end of February, 2010 = $60.7billion
-
8/7/2019 Israel's Economy March 2011
35/39
28
Strong Banking SystemStrong Banking System
9.2 9.49.9
10.310.7 10.7 10.8
11 11.311.6
12.813.4
6
78
9
10
11
12
13
14
2000 2001 2002 2003 2004 2005 2006 2007 2008 Q1
2009
Q2
2009
Q3
2009
Total Capital Ratio
Source: Bank of Israel
Real Estate:
Low LTV rate in Israel (around 50%- 60%)
Israel did not experience a mortgage default crisis during the recent market downturn
-
8/7/2019 Israel's Economy March 2011
36/39
29
Si e and Structure of Government DebtSi e and Structure of Government Debt
T
7
N
T
2
9
Total Government Debt for Year EndTotal Government Debt for Year End 20092009: US$: US$ 158158 billionbillion
Other
6%Sovereign
Bonds
21%
Bonds
Guaranteed
by the USA
45%
Bonds Org.
28%
Source: Ministry of Finance USD/ILS Rate of 3.78
-
8/7/2019 Israel's Economy March 2011
37/39
37
Si e and Structure of Government DebtSi e and Structure of Government Debt
Domestic
Tradable57%
DomesticNon
Tradable24%
ForeginCurrency
19%
Total Government Debt for Q3 2010: US$ 163 billion
BondsOrg.26%
BondsGuaranteed by the
USA
42%
SovereignBonds25%
Other7%
Source: Ministry of Finance
-
8/7/2019 Israel's Economy March 2011
38/39
Sovereign Foreign Currency Rating Peers
Sovereign Moodys S&P
Chile A2 A+
Czech . A1 A
Lithuania Baa1 BBB+
S. Korea A1 A
Poland A2 A-
China A1 A+
Slovakia A1 A+
Latvia Baa3 BB
Cyprus Aa3 A+
Hungary Baa1 BBB-Estonia A1 A-
Greece Ba1 BB+
Taiwan Aa3 AA-
Steady Climb in Ratings Reflects Sound Policies and aSteady Climb in Ratings Reflects Sound Policies and aDynamic Private SectorDynamic Private Sector
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Moody's S&P Fitch
A1/A+
A2/A
A3/A-
Baa1
Baa2/BBB
Baa3/BBB-
Aa3/AA-
Israels Current RatingIsraels Current Rating
Moodys - A1 (Stable)
S&P A (Stable)
Fitch A (Stable)
April 2008Moodys upgrade
Israel To A1
Feb 2008Fitch upgrade
Israel To A
Nov 2007S&P upgradeIsrael To A
Source: Credit Rating Agencies38
-
8/7/2019 Israel's Economy March 2011
39/39
39
Quality in Everything We Do