the israeli economy. the israeli economy - 2009 facts & figures gdp ($billion) 195.8 population...
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The Israeli Economy
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The Israeli Economy - 2009 Facts & Figures
• GDP ($Billion) 195.8• Population (7/2010, Million) 7.6• GDP per capita (2008, $ PPP) 27,900• Foreign Trade (% of GDP) 67% • Total Exports (% of GDP) 35%• Unemployment (7/2010) 6.2%
The Israeli Industry
• Share of business sector 21% • Industrial Sales ($Billion) 82.3• Industrial Exports (% of sales) 42.5% • Employees 360K• Main branches: Chemicals, Electronics & Food2
The Manufacturers' Association of Israel
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The Israeli Economy:Before the Global Crisis
The Manufacturers' Association of Israel
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5 Years of Rapid Growth in Israeli Economy
4
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GDP GDP per Capita Business Sector GDP
5.1%
3.3%
6.9%
4.9%
3.0%
5.8%5.7%
3.8%
7.0%
5.3%
3.5%
5.9%
4.2%
2.4%
4.7%
The Israeli EconomyReal Annual Changes
Source: CBS
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5 Years of Rapid Growth in Israeli Industry
5
The Manufacturers' Association of Israel
Industrial Production Industrial Export Employees
7.0%
17.6%
1.1%
3.7%
5.0%
1.6%
9.8%
11.7%
2.8%
4.5%
12.2%
3.8%
7.4%8.6%
1.7%
Real Annual Changes
Source: CBS
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The Israeli Economy:During the Global Crisis
The Manufacturers' Association of Israel
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Positive Growth in Israel Vs. Regression in Most Developed Countries
Source: Merrill Lynch
7
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0.7
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Relatively Moderate Regression in Israeli Industry
Source: OECD, CBS & MAI Economic Research Department
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The Manufacturers' Association of Israel
4%
-1%
-4% -4% -4%
-6%
-9% -10%-10%-11%-12%-12%-12%
-16%-16%
-18%-18%-18%
-21%
Real Industrial Output Change, 2009 compared to 2008
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Economic Policy During the Crisis
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10
Responsible Fiscal PolicyRestrained Government Budgetary Deficit
As Percentage of GDP
Source: Bank of Israel The Manufacturers' Association of Israel
*Estimate
6.0%5.5%
5.2%
-
Target Deficit Actual Deficit
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14.3%13.6%
11.5% 11.2%10.3% 9.9% 9.4%
7.5%
5.3% 5.2%
3.3%2.2%
0.5%
Israel’s Government Deficit is Relatively LowAs Percent of GDP, 2009
Eurostat, IMF
Relatively Low Government Deficit in Israel
Source: Eurostat, Israeli Ministry of Finance
11
The Manufacturers' Association of Israel
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Round Table ForumGovernmentGovernment
EmployersEmployers EmployeesEmployees
Social Partnership
Model
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Israel Package Deal in 2009/10 Budget
• Purpose: Reduce impact of global crisis on the Israeli
economy, while Supporting the business sector.
• Achievements:
– Support for the business sector:
• Investment and direct support - $ 550 Million
• Increasing state guarantees - $ 1.5 Billion
• Increasing Medium-sized businesses fund - $ 325 Million
– Increasing Domestic Demand: Potential of $ 1 Billion
– Maintaining competitiveness: Preventing price increases -
property tax, water, electricity, additional taxation - millions of $.
The Manufacturers' Association of Israel
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Expanding Monetary PolicyInterest Rates of Central Banks OInterest Rates of Central Banks Over the Worldver the World
%
Crisis begins
Northern Rock Lehman-Brothers collapse
Israel
Source: Bank of Israel14
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Exceptional measures: buying foreign currency & bonds
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Additional Economic Measures
• Establishing funds to ease credit crunch
• Leadership statements :
• Ensuring public deposits in the banking system
• A safety net to ensure pension savings
15
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No need to rescue financial institutions
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The Israeli EconomyThe Israeli Economy
StrengthsStrengths
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0.3%
-1.3%
-3.7%
-4.5%-4.9%
-0.9%
0.6%
1.8%
3.1%
5.1%
2.9%
0.7%
3.8%
A Surplus in The Balance of Payments Current AccountAs Percentage of GDP
Independent of Outside Funding A Continuing Current Account Surplus
Source: CBS & MAI Economic Research Department 17
The Manufacturers' Association of Israel
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Export Oriented Growth in Industry
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7%
41%34% 27% 31%
54%62%
80%
102%
120%
102%
139%
0%
1%
12%
6%4% 4%
11%15%
26%32%
42%33%
47%
Jan.-July 2010
Industrial Exports
Industrial Production
Export Oriented Growth in IndustryReal Cumulative Rate of Change, Since 1998
Export = 31% of Sales
Export = 42.5% of Sales
Source: CBS & MAI Economic Research Department
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Diversion of Trade to Asian Countries
19
The Manufacturers' Association of Israel
Other Asia US EU
23%
15%
28%
34%
22%
20%
28%
30%
Jan. - Aug. 2010
Distribution of export according to areas
Source: CBS & MAI Economic Research Department
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Industrial Output Employment in Industry
Industrial Export
88%
75% 72%
The High Tech Sector Contribution to Industrial Growth in 2004-2009
High Tech As Percentage of Total Growth 2004-2009
A High Tech oriented Growth A High Tech oriented Growth --Most of Industrial growth derived Most of Industrial growth derived fromfrom the High Tech Sector the High Tech Sector
Contribution to
Source: CBS & MAI Economic Research Department
20
The Manufacturers' Association of Israel
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Relatively Low Household Debt in Israel Household Debt to Disposable Income Ratio
21
Source: Bank of Israel The Manufacturers' Association of Israel
יחס החוב של משקי הבית להכנסה הפנויה
צרפת
גרמניה
ארה"בספרד
קנדה
ישראל
בריטניה
30
40
50
60
70
80
90
100
110
120
2000 2001 2002 2003 2004 2005 2006 2007 2008
המקור: OECD, הלשכה המרכזית לסטטיסטיקה והחטיבה למידע וסטטיסטיקה של בנק ישראל.
GBUSA
SpainSpain
Canada
GermanyIsrael
France
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Israel’s Unemployment rate is relatively low
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20.3%
13.8%12.2%
10.1% 10% 9.5%8.5% 8.5% 8.4% 7.8%
6.9%6.2%
5.2%
As Percent of Civilian Labor Force, July 2010
ʸ ʥ̫ʮEUROSTATʮʬʱ
Israel’s Unemployment Rate is relatively low
Source: Eurostat, BLS, CBS
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Relatively High Private Saving Rate in Israel
Households Net Saving Rate as Percentage of Total Income, 2007
Source: Leumi Bank
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The Banking System Conservative & Supervised
24
%
Source: Bank of Israel The Manufacturers' Association of Israel
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Bank Nonperforming Loans to Total Loans – Low Ratio in Israel
25
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0
10
20
30
40
50
6061.2
5.43.3
1.7 1.5 0.4
In Percent, 2009
Source: IMF
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Housing Prices - Relatively Moderate Increase
26Source: Psagot Investment House
The Manufacturers' Association of Israel
Nominal Change in Average Apartment Price, 1997-2007
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Upgrading International Status
• Late 2007 - Early 2008: Raising Israel credit
rating by Standard & Poor's, Moody‘sו- Fitch.
• May 2010: Israel's admission to the OECD.
• May 2010: Updating Israel classification in MSCI
index from a developing to a developed country
The Manufacturers' Association of Israel
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Responsible Fiscal Policy Persistence2011-2012 Biennial Budget• Increasing certainty and stability - Stimulating growth &
investment
• Long-term planning - Improving the planning processes in government offices
• Reducing Political pressure and streamlining processes.
New Formula to Limit Government • Purpose: Reducing Debt/GDP ratio while maintaining an
adequate level of public services.
• Formula:
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60% / (Actual Debt/GDP) X (Annual growth rate in the past 10 years)
60% = Target Debt/GDP Ratio According to Maastricht Treaty
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How to Achieve Competitiveness after the Crisis? 1.Reduction of Corporate Tax2.Nurturing Innovation3. Increasing Efficiency
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Continuous Reduction of Corporate Tax in Israel
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2011F 2012F 2013F 2014F 2015F 2016F
34%
31%
29%
27%26%
25%24%
23%22%
21%20%
18%
Reduction of a Corporate Tax in Israel
Source: Israeli Ministry of Finance
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How to Achieve Competitiveness after the Crisis? 1.Reduction of Corporate Tax2.Nurturing Innovation3. Increasing Efficiency
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Nurturing Innovation = Israel’s Competitive Edge
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World Leadership in Civilian R&D Investments
Source: CBS
33
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4.8%
3.5% 3.5% 3.4% 3.4%
2.5% 2.4%1.9% 1.9%
1.6%1.3% 1.2% 1.1% 1.0%
Israel is The World Leader in Civilian R&D InvestmentAs Percentage of GDP, 20
Isra
el 2
008
– 4.
7%
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17.0
14.8 13.7
12.1 10.9 10.8 10.7
9.2 8.7 8.4 8.3 7.9 7.9 7.9 7.6 7.6 7.5 7.5 7.1 7.1 6.9 6.8 6.7
5.0
ICT Sector GDP, Out of The Business Sector GDP 2006
2009
16
%High Share of ICT in the Business
SectorICT= Information & Communications Technologies, 2006
Source: CBS
34
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Source: The Global Competitiveness Report 2010-2011, World Economic Forum
High Quality of Scientific Research Institutions
35
The Manufacturers' Association of Israel
IsraelSwitzerland
UKUSA
GermanyCanada
AustraliaSingapore
DenmarkNew Zealand
JapanIrelandFranceNorway
KoreaIndia
Hong KongChina
Italy
12
34
68
101112
14
1516
1923
2530
3539
65
The Global Competitiveness Report 2010/ 1* Ranked Israel 1st in the World by the Quality of scientific research institutions Index
* Of The World Economic Forum
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Highly Educated Population
Source: OECD, CBS
36
The Manufacturers' Association of Israel
49%44%
43%41%
40%37%37%
36%36%
34%34%34%
33%32%32%
29%28%
27%25%
23%18%
14%14%
CanadaIsraelJapan
United StatesNew Zealand
FinlandKorea
NorwayAustraliaDenmark
IrelandSwitzerland
United KingdomNetherlands
SwedenSpain
OECD averageFrance
GermanyGreeceAustria
ItalyPortugal
Highly Educated Population, 200Post High School Educated As Percent of population in the ages of 25-64, 2008
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How to Achieve Competitiveness after the Crisis? 1.Reduction of Corporate Tax2.Nurturing Innovation3.Increasing Efficiency
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0%2%
9%9%
17%18%
3%
6% 6%
8%9%
Industry
Business Sector
Product per Hour, Real Cumulative Change
Labor ProductivityContinuous Increase in Labor Productivity
38
The Manufacturers' Association of Israel Source: CBS & MAI Economic Research Department
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Employment Flexibility During the Crisis
39
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Real Decrease in Wages at the Israeli Business Sector
1.2%
3.6%
6.0%
3.8%
1.1%
-1.2%
-2.4%
0.3%
-1.1% -1.6%-2.1%
-4.2%
-2.1% -1.8%
0.1%
1.3%
Real Wage in Business SectorReal Changes, Compared to the Parallel Period in a Previous Year
Source: CBS & MAI Economic Research Department
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80%
30%
7%
15%
6%
11%
Reducing Overtime
At the expense of employees' vacation days
Unpayment vacation
At the expense of employees vacation days
while lowering wages
Reducing job scopes while lowering wages
Efficiency Measures Taken by Industrial CompaniesTowards all Employees, Excluding Management
Employment Flexibility During the Crisis
40Source: MAI Economic Research Department, Survey - February 2009
The Manufacturers' Association of Israel
Concentrated vacation
Shortened workweek
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How to Achieve Competitiveness after the Crisis?
Israeli Economy Main Challenges
• Preserving the competitive advantage: R&D, technology, innovation
• Encouraging foreign direct investment (Law Changes)
• Upgrading the education system
• Upgrading infrastructures
• Reducing bureaucracy
• Encouraging entrepreneurship
• Raising employment rate
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2010 Forecasts
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An Accelerated Growth is Expected in 2010
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GDP GDP per Capita Business Sector GDP
4.0%
2.2%
4.5%
0.7%
-1.1%-0.2%
4.1%
2.2%
4.5%
-
1.6%
3.8%
2010 est. 2011 Forecast
Economic Forecast for 2011Real Annual Changes
Source: CBS
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Export Oriented Growth is expected in Israeli Industry, 2010
* Excluding Diamonds44
The Manufacturers' Association of Israel
Source: CBS & MAI Economic Research Department
Industrial Production Industrial Export Employees
7.4% 8.6%
1.7%
-6.0%-8.3%
-4.8%
2010 est.
Real Annual Changes
2010ʤʩʩ́ ʲ ʺ ʡʺ ʹ ʣʥʧʮʤʧʩʮʶ
ʨɦ ʥʢʥʠʹ ʣʥʧʣ̡ʠʥʁʩʤʩhʥ̋hʯʣʮʥʠʬʲ ʱ ʱ ʥʡʮʩʬʥʩʭʩ́ʣʥʧʬʠʥʁʩʤʩyʩʧʮ-ʨɦ ʥʢʥʠ
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Source: IMF & Bank of Israel
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Relatively Low Unemployment Rate is Expected in Israel, 2011
The Manufacturers' Association of Israel
19.3%
14.6%
13%
10.9%10% 9.8% 9.6%
8.7% 8.6% 8.5% 8.2%7.5% 7.4% 7.1%
6%5.1%
ʺ ʰʹ ʬʬʠʸ ʹ ʩʡʩʥɹʁ ʤʤʬʨʡʠʤy ʥ̡ʩ́ʺ ʩʮʥʠʬʰʩʡʤʠʥʥ́ʤʡʪʥʮʰAs Percent of Civilian Labor Force
ʸ ʥ̫ʮʤ̋ ʩʦʧʺ-IMFʸ ʡʥʨ̫ ʥʠʬʠʸ ʹ ʩ̫ʰʡ
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Israel’s Growth Outlook – Well Above Developed Countries Average
Source: IMF, Merrill Lynch, March 2010.46
The Manufacturers' Association of Israel
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Thank you
Manufacturers’ Association of Israel
Daphna Aviram-Nitzan, Head of Economic Research Department Julie Sadeh Zeltcer, Head of Economics Analysis SectionHagit Shmariahu, EconomistEddie Parkansky, EconomistTel. 03-5198806
This publication is also available at the MAI site :www.industry.org.il
For additional information please contact the Economic Research Department’s staff:
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