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Economy of Israel
1 New Israeli Sheqel (1994-1995).jpg
1 New Israeli Shekel Coin
Currency New Israeli Shekel (NIS)
Fiscal year Calendar Year
Trade organisations WTO, OECD (Trial member)
GDP $205.7 billion (2008 est.)
GDP growth 4.2% (2008 est.), 0.5% (2009 est.)[1]
GDP per capita $28,900 (2008 est.)
GDP by sector agriculture (2.7%), industry (31.7%), services (65.6%) (2008 est.)
Inflation (CPI) 4.7% (2008 est.)
below poverty line
10.8% (2005)
Gini index 38.6 (2005)
Labour force 2.95 million (2008 est.)
Labour force
by occupation
Agriculture (2%), Industry (16%), Services (82%) (30 September 2008)
Unemployment 7.7% (2009)[1]
Main industries high-technology projects (including aviation, communications, computer-aided design and manufacture, medical electronics, fiber optics), wood and paper products, potash and phosphates, food, beverages, and tobacco, caustic soda, cement, construction, metal products, chemical products, plastics, diamond cutting, textiles and footwear
Exports $54.16 billion f.o.b. (2008 est.)
Export goods machinery and equipment, software, cut diamonds, agricultural products, chemicals, textiles and apparel, military equipment, food.
Main export partners US 38.4%, Belgium 6.5%, Hong Kong 5.9% (2006)
Imports $62.52 billion f.o.b. (2008 est.)
Import goods raw materials, military equipment, investment goods, rough diamonds, fuels, grain, consumer goods
Main import partners United States 13.9%, Belgium 7.9%, Germany 6.2%, China 6.1%, Switzerland 5.1%, United Kingdom 4.7%, Italy 4.1% (2007)
Public finances
Public debt $91.25 billion (31 December 2008 est.)
Revenues $68.44 billion (2008 est.)
Expenses $70.06 billion (2008 est.)
Main data source: CIA World Fact Book
All values, unless otherwise stated, are in US dollars

The economy of Israel is a diversified market economy with substantial state 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. In May 2007, Israel was invited to join the OECD.[2]

The country's GDP (Purchasing power parity) in 2006 reached $195 billion according to the International Monetary Fund or $179 billion according to the World Bank (see List of countries by GDP (PPP)). GDP per capita has been $31,767 according to the International Monetary Fund in 2007 or $26,200 in 2006 according to the CIA World Factbook. The economy grew by 8% in the last quarter of 2006, faster than any of its Western counterparts.[3]

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. In 1998, Tel Aviv was named by Newsweek as one of the ten most technologically influential cities in the world.[4] American billionaires and business tycoons including Bill Gates, Warren Buffett, and Donald Trump have each praised Israel’s economic environment,[5] and the country was the destination for Berkshire Hathaway's first investment outside of the USA when it purchased ISCAR Metalworking, and the first R&D Centers outside the USA for companies including Intel and Microsoft. The country has now become known as Silicon Wadi.

Israel has signed free trade agreements with the European Union, the United States, the European Free Trade Association, Turkey, Mexico, Canada, Jordan, Egypt, and on 18 December 2007, became the first non-Latin American country to sign a free trade agreement with the Mercosur trade bloc.[6][7]

Israel also enjoys the availability of $3.148 billion in U.S. loan guarantees, whose conditions are negotiated each year at the U.S.-Israel Joint Economic Development Group (JEDG), if needed to help support government bond sales, though in recent years Israel has opted not to use this facility.[8]


Macro-economic trend

This is a chart of trend of gross domestic product of Israel at market prices estimated by the International Monetary Fund and EconStats with figures in millions of Israeli Shekels. Average wages in 2007 hover around $109–133 per day.

Year Gross Domestic Product Per Capita Income
(as % of USA)
1985 28,437 38.37
1990 106,475 53.15
1995 269,718 64.29
2000 470,732 58.45
2005 553,970 47.45
2007 624,2981

^1 IMF Report

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, inflation soared and government expenditures rose significantly. Also worthy of mention is the 1983 Bank stock crisis.

By 1984, the economic situation became almost catastrophic with inflation reaching an annual rate close to 450% and projected to reach over 1000% by the end of the following year. However, the successful economic stabilization plan implemented in 1985 [9] (devised by Yitzhak Moda'i) and the subsequent introduction of market-oriented structural reforms [10][11] reinvigorated the economy and paved the way for its rapid growth in the 1990s and became a model for other countries facing similar economic crises.[12]

Two developments have helped to transform Israel's economy since the beginning of the 1990s. The first is waves of Jewish immigration, predominantly from the countries of the former USSR, that has brought over one million new citizens to Israel. These new immigrants, many of them highly educated, now constitute some 16% of Israel's 6.5 million population. 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 led to a peace treaty between Israel and Jordan (1994).

The Oslo Accords between Israel and the Arabs led to the Second Intifada, which caused Israel to lose billions of dollars in economic terms. Experts say that even had the peace process not failed the Arab economies had little to offer Israel in terms of trade except for oil. In spite of Israel's difficult security situation it managed to open up new markets to Israeli exporters farther afield, such as in the rapidly growing countries of East Asia.

In the past few years there has been 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. In 2006, foreign investment in Israel totaled $13 billion, according to the Manufacturers Association of Israel.[3] Thus, in Israeli terms, prosperity increases, regardless of whether there is a de-facto peace or not. The Financial Times recently said that 'bombs drop, yet Israel's economy grows', as a demarker to this fact.[13] Moreover, while Israel's total gross external debt is US$84 billion, or approximately 44% of GDP, since 2001 it has become a net lender nation in terms of net external debt (the total value of assets vs. liabilities in debt instruments owed abroad), which as of June 2009 stood at a significant surplus of US$54 billion.[14][15]

The Israeli economy withstood the late-2000s recession rather well, registering positive GDP growth in 2009 and ending the decade with an unemployment rate lower than that of many western countries.[1] There are several reasons behind this economic resilience, for example, the fact, as stated above, that the country is a net lender rather than a borrower nation and the government and the Bank of Israel's generally conservative macro-economic policies. Two policies in particular can be cited, one is the refusal of the government to succumb to pressure by the banks to appropriate large sums of public money to aid them early in the crisis, thus limiting their risky behavior. The second is the implementation of the recommendations of the Bach'ar commission in the early to mid-2000s which recommended decoupling the banks' depository and investment banking activities, contrary to the then-opposite trend, particularly in the United States, of easing such restrictions which had the effect of encouraging more risk-taking in the financial systems of those countries.[16]

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.[17]


External trade

For 2006, Israeli exports grew by 11% to just over $29 billion; the hi-tech sector accounted for $14 billion, a 20% increase from the previous year.[3]

Israeli exports in 2006

The United States is Israel's largest trading partner; two-way trade totalled 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).

2.8% of the country's GDP is derived from Agricultural activity. While Israel imports substantial quantities of grain, it is largely self-sufficient in other agricultural products and food stuffs, because food must be regulated Kashrut for sale in the Israeli retail market, and hence imports almost no food products from other countries. For centuries, farmers in Israel have grown varieties of citrus fruits such as grapefruit, oranges and lemons. Citrus fruits are still Israel's major agricultural export (see Jaffa orange) In addition, Israel is one of the world's leading greenhouse food exporting countries, it produces tomatoes for example.

Israel is one of the world's major exporters of military equipment, accounting for 10%[citation needed] of the world total in 2007.


Comparing incomes of a median household in Israel vs. other countries.

"OECD, PPP conversion rates". Retrieved 2006-01-20.  "OECD, PPP conversion rates in Israel". Retrieved 2007-01-25. 

Country Median household income national currency units Year PPP rate (OECD) Median household income (PPP)
Switzerland[18] (gross) 107,748 CHF, $99,482 2007 1.787236 $60,288
California, US[19] 55,450 USD 2007 1.00 $55,450
United States 50,233 USD 2007 1.00 $50,233
Canada [20] 53,634 CAD 2005 1.21 $44,000
Switzerland[18] (after taxes and health insurance) 75,312 CHF, $69,534 2007 1.723465 $43,698
New Zealand [21] 62,556 NZD 2007 1.54 $41,000
United Kingdom [22] 24,700 GBP 2004 0.632 $39,000
Australia[23] 53,404 AUD 2006 1.41 $38,000
Israel[24] 107,820 ILS 2006 2.90 $37,000
Ireland 35,410 EUR 2005 1.02 $35,000
United Kingdom[25]
21,892 GBP 2005 0.649 $34,000
West Virginia, US[26] US state $33,000
Hong Kong[27] 186,000 HKD 2005 5.96 $31,000
Singapore[28] 45,960 SGD 2005 1.55 $30,000
Annual data 2006 Historical averages (%) 2002-06
Population (m) - 7.1 Population growth - 1.8
GDP per head (US$; purchasing power parity) - 27,588 Real GDP growth - 3.1
Percent of unemployed persons (May 2009) - 8.4% Inflation - 1.9
Exchange rate (av) NIS:US$ - 3.8 Current-account balance (% of GDP) - 1.6

According to the data published by Ian Fursman 60% of the poor households in Israel are of the Haredi Jews and the Israeli Arabs in which there is a high birth rate and a low participation rate in the labor force. Both Groups together represent 25 - 28% of the Israeli population.



Diamond industry


Israel currently relies on external imports for meeting most of its energy needs, spending an amount equivalent to over 5% of its GDP per year on imports of energy products.[29] The transportation sector relies mainly on gasoline and diesel fuel while the majority of electricity production is generated using imported coal. The country possesses negligible reserves of crude oil but does have some substantial domestic natural gas resources. A 32 billion cubic meters (BCM) natural gas field is located offshore Ashkelon, however, as of 2009 it is approximately two-thirds exhausted. In early 2009, a significant gas find with proven reserves of 170 BCM (217BCM probable) was located in deep water approximately 90 km west of Haifa.[30] A smaller 15 BCM field situated nearer the coastline was also located in 2009. In the years 2009-2030, the Israeli market is expected to consume around 250 BCM of natural gas and proven domestic supplies can account for approximately 80% of this amount. The remainder is expected to be purchased by pipeline from nearby Egypt and in the form of LNG from other countries. Nevertheless, the large gas find near Haifa has significantly raised the prospect of finding additional domestic resources of natural gas along the Eastern Mediterranean shore, prompting more exploratory drilling off Israel's coastline.

Field [31] Discovered Production Estimated size
Mari-B 2000 2004 1 trillion cubic feet
Tamar 2008 Not in production 5 trillion cubic feet
Dalit 2009 Not in production 700 billion cubic feet

Solar Energy

The Negev Desert is home to the Israeli solar research industry, in particular the National Solar Energy Center and the Arava Valley, which is the sunniest area of Israel.

Solar power in Israel and the Israeli solar energy industry has a history that dates to the founding of the country. In the 1950s, Levi Yissar developed a solar water heater to help assuage an energy shortage in the new country.[32] By 1967 around one in twenty households heated their water with the sun and 50,000 solar heaters had been sold.[32] With the 1970s oil crisis, Harry Zvi Tabor, the father of Israel's solar industry, developed the prototype solar water heater that is now used in over 90% of Israeli homes.[33] Israeli engineers are on the cutting edge of solar energy technology[34] and its solar companies work on projects around the world.[35]

Financial sector

Industrial sector

Further information: Companies of Israel by industry

Technology sector




See also



  1. ^ a b c Moti Bassok (2010-01-02). "GDP, jobs figures end 2009 on a high". Haaretz. Retrieved 2010-01-02. 
  2. ^ "Israel invited to join the OECD".,7340,L-3400955,00.html. Retrieved 2007-05-21. 
  3. ^ a b c "Israeli Growth", Dateline World Jewry, September, 2007
  4. ^ Tel Aviv Hailed as One of the World's Top Hi-tech Centers. The Israeli Economy Achievements and Potential. Ministry of Finance of Israel (MOF) November 1998.
  5. ^ "AIPAC: Today's Briefing". 2006-12-12. Retrieved 2006-12-12. 
  6. ^
  7. ^ December 2007.htm
  8. ^ Tova Cohen (23 July 2009). "Israel doesn't see U.S. limiting loan guarantees". Reuters. Retrieved 20 September 2009. 
  9. ^ Eleventh Knesset
  10. ^ Generating a Sharp Disinflation: Israel 1985 Michael Bruno, National Bureau of Economic Research
  11. ^ Israel's Economy: 1986-2008, Rafi Melnick and Yosef Mealem
  12. ^ See Stopping High Inflation - The Israeli Stabilization Program, 1985-86, Stanley Fischer, The American Economic Review, Vol. 77, No. 2
  13. ^,dwp_uuid=f98b03ba-4d11-11da-ba44-0000779e2340.html
  14. ^ "Israel's International Investment Position (IIP), June 2009". Bank of Israel. 
  15. ^ "The world owes the Israeli economy $16.9 billion". I.B.I. 
  16. ^ Guy Rolnik (2009-12-31). "How another Giant Crisis was Wasted" (in Hebrew). TheMarker. Retrieved 2010-01-02. 
  17. ^ U.S. listed Israeli companies
  18. ^ a b "Household income and expenditure 2007". Retrieved 2009-07-13. 
  19. ^ "California Median Household income, 2007". Retrieved 2009-06-05. 
  20. ^ "Canada median household income". Retrieved 2008-5-2. 
  21. ^ "New Zealand income survey showing median household income". Retrieved 2007-10-04. 
  22. ^ "UK parliament discussion showing median household income". Retrieved 2006-12-31. 
  23. ^ "Census QuickStats". Retrieved 2007-10-07. 
  24. ^ "israeli median household income, 2006". Retrieved 2008-01-15. 
  25. ^ "Scottish Economic Statistics 2007". Retrieved 2007-10-09. 
  26. ^ "West Virginia, Median Household Income, 2005". Retrieved 2007-03-22. 
  27. ^ "Hong Kong median household income, 2005". Retrieved 2007-01-19. 
  28. ^ "Singapore median household income, 2005". Retrieved 2007-01-19. 
  29. ^ Asa-El, Amotz (2009-01-27). "Gas discovery tempers Israeli recession blues". MarketWatch. Retrieved 2009-02-01. 
  30. ^ "Tamar offshore field promises even more gas than expected". Haaretz. 2009-08-12. Retrieved 2009-08-12. 
  31. ^
  32. ^ a b Petrotyranny by John C. Bacher, David Suzuki, published by Dundurn Press Ltd., 2000; reference is at Page 70 [1]
  33. ^ At the Zenith of Solar Energy, Neal Sandler,BusinessWeek, March 26, 2008.
  34. ^ Israel Pushes Solar Energy Technology, Linda Gradstein, National Public Radio, October 22, 2007.
  35. ^ Looking to the sun, Tom Parry, Canadian Broadcasting Corporation, August 15, 2007.


  • Ben-Porath, Yoram ed. The Israeli Economy: Maturing through Crises. Cambridge, Massachusetts: Harvard University Press, 1986.
  • Chill, Dan. The Arab Boycott of Israel: Economic Aggression and World Reaction. New York: Praeger Publishers, 1976.
  • Kanovsky, Eliyahu. The Economy of the Israeli Kibbutz. Cambridge, Massachusetts: Harvard University Press, 1966.
  • Klein, Michael. A Gemara of the Israel Economy. Cambridge, Massachusetts: National Bureau of Economic Research, 2005.
  • Michaely, Michael. Foreign Trade Regimes and Economic Development: Israel. New York: National Bureau of Economic Research, 1975.
  • Ram, Uri (2008). The Globalization of Israel: McWorld in Tel Aviv, Jihad in Jerusalem. New York: Routledge. ISBN 0415953049. 
  • Seliktar, Ofira. “The Changing Political Economy of Israel: From Agricultural Pioneers to the “Silicon Valley” of the Middle East.” In Israel’s First Fifty Years edited by Robert Freedman 197-218. Gainesville, Florida: University of Florida Press, 2000.
  • Senor, Dan and Singer, Saul, Start-up Nation: The Story of Israel's Economic Miracle, Hachette Book Group, New York, (2009) ISBN 044654146X
  • Rubner, Alex. The Economy of Israel: A Critical Account of the First Ten Years. New York: Frederick A. Praeger Publishers, 1960.
  • Aharoni, Sara and Meir (2005). Industry & Economy in Israel.

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