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Israel - Overview

Contents extracted from the comprehensive atlas of international trade by Export Entreprises

Introduction

Capital::
The State of Israel has established its capital in Jerusalem, despite the absence of international agreement on the status of this city.
Area:: 22 km2
Total Population:: 7.910
Annual growth rate:: 2.00%
Density:: 366.00/km2
Urban population:: 92%
Population of Tel Aviv (3.250), Jerusalem (1.029), Haifa (975), Rishon LeZion (220)
Official language: In Israel the official languages are Hebrew and Arabic. The national language of Israeli is modern Hebrew, but since only 60% of the population was born in Israel, this language is not the mother tongue of nearly half of the population.
Other languages spoken: Israeli speak other languages like English, French, Russian, or Yiddish. English is considered as the main foreign language in Israel (main language for international communication), followed by French. Russian is the third important foreign language of the country. Finally, Yiddish is spoken by around 500,000 speakers. Moreover, a large number of other languages are spoken by the people originally from Latin America or Central Europe: Spanish, Rumanian, Hungarian, German, Polish, Persian, Amharic and Tigrinya
Business language: English
Ethnic Origins:: 52.5% are Sabras (Israeli-born), 22.5% are immigrants (mostly from Europe and the Americas, but also from Asia and Africa) and 20% are Arabs.
Beliefs: 75.6% Jews and 24.4% non Jews (mostly Muslims 20%, Christians 4.4%).
Telephone codes:
To make a call from: 0
To make a call to: +972
Internet suffix:: .il
Type of State::
Israel (official name: State of Israel) is a state-nation based on a parliamentary democracy, apart from the military administration in the occupied Palestinian territories.
Type of economy::
High-income economy, Emerging Financial Market
The country has the world's greatest number of start-ups; there is also a considerable spending on research and development. The Israeli technological incubators have helped make Israel’s high-tech entrepreneurship world-renowned.

Economic overview

The Israeli economy, long protected from the global economic crisis, experienced a slowdown in 2011 and has been stagnating at around 3% due to a decline in consumption and a weak external demand. In 2013, economic growth reached 3.8% of the GDP thanks to the opening of new natural gas fields. It should remain stable in 2014 due to weak domestic demand and an international context which does not stimulate exports.

The economic fundamentals of Israel, which joined the OECD in 2010, are solid, but vulnerabilities exist: public debt is high compared with other emerging countries, defense spending reduces the tax manoeuvering space, the economy is very dependent on exports to Europe and the United States, there is a lack of university graduates and property prices are soaring. The 2013-2014 budget, which was adopted in July, is based on an austerity plan to reduce the budget deficit: budget cuts to save around 3 billion euro and a rise in taxation. In October, the government agreed to increase the defense budget which had been reduced to help rebalance the state finances. The country spends four times as much on its defense as its fellow members of the OEDC. New budget cuts have been announced for the 2015 budget year, introducing new reductions in public services, although Israel has the lowest levels of welfare spending among the OEDC countries and a high level of inequality. In addition to the decrease in public spending, a drop in tax revenue has been predicted. The resulting regional instability and lack of security are a major concern.

Israel enjoys one of the highest standards of living in the area and the average salary is at a close level to the European average. However, 25% of Israelis live in poverty and inequalities are strong, which explains the reasons of the social revolt against price increase, which erupted in 2011. The unemployment rate experienced a rise in connection to the global crisis, but decreased again to 6% in 2011. As the IMF has stressed, Israel should confront the problem of social and economic integration of the Arab and Haredi minority.

Main industries

Israel has a diversified and technologically advanced economy. The agricultural sector employs under 2% of the population and the country's main crops are fruits and vegetables, cereals, wine and cattle farming. The country is self-sufficient in food production, with the exception of cereals.

The fields of excellence of the Israeli industry are chemical products (Israel specializes in generic medicines), plastics engineering and high technologies. The companies, particularly those of the state-of-the-art technology, have profited from the collection of funds arriving from Wall Street and other financial centers of the world. As a fact, Israel classifies second, after Canada, for the number of companies registered in the American stock market. The state-of-the-art technologies (aeronautics, electronics, telecommunications, software, bio-technologies) represent about 40% of GDP. The other important activity sectors in Israel are diamond cutting, textile and tourism. This last sector remains important despite the Israeli-Palestinian conflict. 

Foreign trade overview

The Israeli economy is extremely open. Trade represents nearly 70% of GDP (average 2009-2011), and exports, the backbone of the country's growth, about 24% of GNP. The trade balance of Israel, before deficit, recorded a record surplus in 2009 due to a sharp drop in imports. The situation was reversed again in 2010.

In 2013, the country's trade deficit diminished by more than 20% compared to 2012 (value in USD), especially due to a drop in imports (reduction in the energy bill) and the recovery of exports (especially hi-tech products).

The main customers and suppliers of Israel are the European Union, the United States, Turkey, Japan, India and China. The main goods imported by the Israeli state are raw materials and half-finished products, hydrocarbons, consumption goods (food products and drinks, electrical equipment, transport equipment, etc.) and investment products. The main national exports are manufactured goods which are often high technology products (computer equipment, electronic components, aeronautics, electronic communication equipment, verification products and pharmaceutical products).

FDI

The investment system in Israel is liberal and most of the activities are open to private national and foreign investors.  After a marked slowdown in 2009-2010 as an effect of the global economic crisis and especially the difficulties of the American economy (Israeli start-ups are highly dependent on the U.S. conjecture), FDIs recovered since 2011 and have been going stronger since. In 2013, FDI influx rose by 48% compared to 2012. Israel benefits from a number of assets: a strong R&D activity and a high-skilled and multilingual workforce. However,  the country suffers from a particularly unstable geopolitical environment.
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