Economy of Israel

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Template:Israelis Israel has a diversified modern economy with substantial government ownership and a rapidly developing high-tech sector. Poor in natural resources, Israel depends on imports of petroleum, coal, food, uncut diamonds, other production inputs, and military equipment. It also has received substantial direct economic aid from the United States, including approximately $1.2 billion per year since the mid-1970's, although that regular annual amount has been being tapered off by $120 million per year beginning in 1998. Israel's GDP in 2004 reached $145 billion, about $20 thousand per person. The major industrial sectors include metal products, electronic and biomedical equipment, processed foods, chemicals, and transport equipment. Israel possesses a substantial service sector and the Israel diamond industry is one of the world's centers for diamond cutting and polishing. It is also a world leader in software development and is a major tourist destination.

Israel's strong commitment to economic development and its talented work force led to economic growth rates during the nation's first two decades that frequently exceeded 10% annually. The years after the 1973 Yom Kippur War were a lost decade economically, as growth stalled and inflation reached triple-digit levels. The successful economic stabilization plan implemented in 1985 and the subsequent introduction of market-oriented structural reforms reinvigorated the economy and paved the way for its rapid growth in the 1990s.

Two developments have helped to transform Israel's economy since the beginning of the decade. The first is waves of Jewish immigration, predominantly from the countries of the former USSR, that has brought over one million of new citizens to Israel. These new immigrants, many of them highly educated, now constitute some 16% of Israel's 6.5 million population. Their successful absorption into Israeli society and its labor force forms a remarkable chapter in Israeli history. The skills brought by the new immigrants and their added demand as consumers have given the Israeli economy a strong upward push.

The second development benefiting the Israeli economy is the peace process begun at the Madrid conference of October 1991, which led to the signing of accords between Israel and the Palestinians (1993) and a peace treaty between Israel and Jordan (1994). The peace process has helped to ease Israel's economic isolation from its neighbors and has begun a process of regional economic integration that may help to stabilize the region. It has also opened up new markets to Israeli exporters farther afield, such as in the rapidly growing countries of East Asia. The peace process has stimulated an unprecedented inflow of foreign investment in Israel, as companies that formerly shunned the Israeli market now see its potential contribution to their global strategies.

Israeli companies, particularly in the high-tech area, have recently enjoyed considerable success raising money on Wall Street and other world financial markets; Israel now ranks second among foreign countries in the number of its companies listed on U.S. stock exchanges.

The United States is Israel's largest trading partner; two-way trade totaled some $12.6 billion in 1997. The principal U.S. exports to Israel include computers, integrated circuits, aircraft parts and other defense equipment, wheat, and automobiles. Israel's chief exports to the U.S. include cut diamonds, jewelry, integrated circuits, printing machinery, and telecommunications equipment. The two countries signed a free trade agreement (FTA) in 1985 that progressively eliminated tariffs on most goods traded between the two countries over the following ten years. An agricultural trade accord was signed in November 1996, which addressed the remaining goods not covered in the FTA. Some non-tariff barriers and tariffs on goods remain, however. Israel also has trade and cooperation agreements in place with the European Union and Canada, and is seeking to conclude such agreements with a number of other countries, including Turkey, Jordan and several countries in Eastern Europe.

Until the last decade, Israel's trade with the Arab world was minimal due to the Arab League boycott. Beginning in 1945, Arab nations not only refused to have direct trade with Israel (the primary boycott), but they also refused to do business with any corporation that operated in Israel, or any corporation that did business with a corporation that did business with Israel (the secondary and tertiary boycotts).

Israel is one of the world's major exporters of military equipment, accounting for 10% of the world total in 2003.

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Statistics

The following statistics are from the CIA World Factbook [1]:

GDP: purchasing power parity - $139.2 billion (2005 est.)

GDP - real growth rate: 4.3% (2005 est.)

GDP - per capita: purchasing power parity - $22,200 (2005 est.)

GDP - composition by sector: agriculture: 2.8% industry: 37.7% services: 59.5% (2003 est.)

Investment (gross fixed): 17.5% of GDP (2005 est.)

Population below poverty line: 21% (2005 est.) [An estimated 40% of those are lifted from below the poverty line]

Household income or consumption by percentage share: lowest 10%: 2.4% highest 10%: 28.3% (1997)

Distribution of family income - Gini index: 34 (2005)

Inflation rate (consumer prices): 1.3% (2005 est.)

Labor force: 2.42 million (2005 est.)

Labor force - by occupation: agriculture, forestry, and fishing 2.6%, manufacturing 20.2%, construction 7.5%, commerce 12.8%, transport, storage, and communications 6.2%, finance and business 13.1%, personal and other services 6.4%, public services 31.2% (1996)

Unemployment rate: 8.9% (2005 est.)

Budget: revenues: $43.82 billion expenditures: $58.04 billion, including capital expenditures of NA (2006 est.)

Public debt: 101% of GDP (2005 est.)

Agriculture - products: citrus, vegetables, cotton; beef, poultry, dairy products

Industries: high-technology projects (including aviation, communications, computer-aided design and manufactures, medical electronics, fiber optics), wood and paper products, potash and phosphates, food, beverages, and tobacco, caustic soda, cement, construction, metals products, chemical products, plastics, diamond cutting, textiles and footwear

Industrial production growth rate: 4.8% (2005 est.)

Electricity - production: 44.24 billion kWh (2003)

Electricity - consumption: 39.67 billion kWh (2003)

Electricity - exports: 1.47 billion kWh (2003)

Electricity - imports: 0 kWh (2003)

Oil - production: 2,740 bbl/day (2003 est.)

Oil - consumption: 270,100 bbl/day (2003 est.)

Oil - exports: NA (2001)

Oil - imports: NA (2001)

Oil - proved reserves: 1.92 million barrels (305,000 m³) 1 January 2002

Natural gas - production: 10 million m³ (2001 est.)

Natural gas - consumption: 10 million m³ (2001 est.)

Natural gas - exports: 0 m³ (2001 est.)

Natural gas - imports: 0 m³ (2001 est.)

Natural gas - proved reserves: 20.81 km³ (1 January 2002)

Current account balance: $500 million (2005 est.)

Exports: $40.14 billion f.o.b. (2005 est.)

Exports - commodities: machinery and equipment, software, cut diamonds, agricultural products, chemicals, textiles and apparel

Exports - partners: US 36.8%, Belgium 7.5%, Hong Kong 4.9% (2004)

Imports: $43.19 billion f.o.b. (2005 est.)

Imports - commodities: raw materials, military equipment, investment goods, rough diamonds, fuels, grain, consumer goods

Imports - partners: US 15%, Belgium 10.1%, Germany 7.5%, UK 6.1%, Switzerland 6.5% (2004)

Reserves of foreign exchange & gold: $29.69 billion (2005 est.)

Debt - external: $73.87 billion (30 June 2005 est.)

Economic aid - recipient: $662 million from US (2003 est.)

Currency: new Israeli shekel (ILS); note - NIS is the currency abbreviation; ILS is the International Organization for Standarization (ISO) code for the NIS

Currency code: new Israeli shekel (ILS); note - NIS is the currency abbreviation; ILS is the International Organization for Standarization (ISO) code for the NIS

Exchange rates: new Israeli shekels per US dollar - 4.46 (2005), 4.482 (2004), 4.5541 (2003), 4.7378 (2002), 4.2057 (2001)

Fiscal year: calendar year

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