The state of the Israeli economy

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The state of theIsraeli economy
Ministry of Finance
December 2005
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(No Transcript)
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Facts figures
Declared independence 1948 Area 22,330 sq
km Government parliamentary democracy Population
6,809,000 (2004) Population growth
1.8 Literacy 95.4 Religion 76.4 Jewish,
16.0 Muslim Economy advanced industrialized
market economy
Source CIA Fact book
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A country seeking peace

• Milestones in the Peace Process
• 1979 - Peace treaty with Egypt
• 1993 - Oslo Accord with Palestinians
• 1994 - Peace treaty with Jordan
• 2005 - Disengagement from Gaza

• Improved Political Environment
• New regime in Iraq
• Changes within the Palestinian Authority
• Israeli commitment to finding a solution

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Clear and consistent economic policy
Budget discipline
Tax reduction
From welfare to work
Market economy privatization reforms
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Economic Policy budget discipline
General government expenditure as of GDP
Budget deficit as of GDP

Source Ministry of Finance
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Economic Policy tax reduction
Average tax rate on personal income
Corporate tax rate
2002
2005
2010
Monthly income, NIS, 2005 prices
Source Ministry of Finance
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Economic Policy from welfare to work
Unemployment and Participation rates
Source Ministry of Finance
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Economic policy Market economy

• Reforms

• Privatization
• on the way

• EL AL Israeli Airline Co.
• ZIM Israeli Shipping Co.
• Israel Discount Bank
• Bezeq Israeli Telecom Co.
• Bank Leumi
• Bazan Israeli Refineries
• Israeli Defense Industry

• Pension funds
• Sea ports
• Tax
• Capital markets

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Economic performance

• Sustainable growth
• Inflation under control
• Interest rates at record low
• Outstanding equity market performance
• Tourism back to 2000 figures
• Increase in foreign direct investments
• Strong and stable ratings

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Sustainable growth
Growth of GDP per Capita per annum


Source Central Bureau of Statistics and
Ministry of Finance
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Inflation under control
Year-end inflation rate
Central Banks key interest rate


4.5
Source Ministry of Finance and Bank of Israel
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Yields on indexed government bonds, 2001-2005
Drop in interest rates
Source Bank of Israel, MoF estimates
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Outstanding equity market performance
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Increase in tourist confidence
Number of tourist arrivals by air (per month)
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Favorable government debt structure
External public sector debt as of March 2005
Source of debt
Original term to maturity
Source Bank of Israel March 2005
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Net Inflows of Foreign Direct Investment in
Israel (US billions)
Return of foreign investors
JAN-NOV 2005 at annual rate
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Strong and Stable Credit Ratings
A1/A
A2/A
A3/A-
Baa1 /BBB
Baa2 /BBB
Baa3 /BBB-
SP, 2005
The solid investment grade ratings on Israel
reflect its advanced, prosperous, export-oriented
economy with few balance-of-payments pressures,
underpinned by structural reforms.
Moodys, 2004
In economic terms, the current Israeli
government is the most pro-market government in
50 years.
Source Credit Rating Agencies
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Diverse trading
Exports Imports
Europe
North America
Israel
Asia
Australia
South/ Central America
Africa
Excluding diamonds
Source Central Bureau of Statistics, 2004
Other
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Hi-Tech attraction
International technologycompanies invested in
Israel
Israeli tech companies

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Conclusions

• Clear and consistent economic policy
• Commitment to deep and lasting structural reforms
• Sound and resilient credit quality
• Fundamentals compare favorably with higher-rated
  sovereigns
• New geopolitical environment
• Real business opportunities

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Additional Information...

• Web site addresses
• Ministry of Finance
• http//www.mof.gov.il/englishframe.htm
• http//www.mof.gov.il/research_e
• Bank of Israel
• http//www.bankisrael.gov.il/firsteng.htm
• Central Bureau of Statistics
• http//www.cbs.gov.il/engindex.htm