Israel: Economic and Political Outline

Economic Overview

After slowing in 2009 as a result of the global economic crisis, growth resumed in 2010 (4.2%) and 2011 (4.7%), driven by a dynamic private consumption, a high level of investment in companies and an increase in R&D and exports. Due to the slowdown in consumption and a lower external demand, growth should decrease to below 3% in 2012.

The economic fundamentals of Israel, which joined the OECD in 2010, are solid. In September 2011, the rating agency Standard & Poor's raised the rating of the country's long-term debt, taking into account future production of gas fields. But vulnerabilities exist: public debt is high compared with other emerging countries, defense spending reduces the tax maneuvering 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. In response to the protest movement that erupted in 2011, the government announced a fiscal package financed by tax increases and cuts in the military budget. In response to the eurozone crisis, the central bank lowered its interest rates. The security issue, given the instability in the Arab world, and tensions with Iran, remain at the forefront.

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 5.6% in 2011. As the IMF has stressed, Israel should confront the problem of social and economic integration of the Arab and Haredi minority.

Main Sectors of Industry

Israel has a diversified and technologically advanced economy. The agricultural sector employs 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 one is always significant despite the Israeli-Palestian conflict. 

Source: World Bank - Last Available Data.

Indicator of Economic Freedom

Score:

68.5/100

Position:

Moderately free

World Rank:

41/179

Regional Rank:

5/17

Distribution of Economic freedom in the world
Source: 2011 Index of Economic freedom, Heritage Foundation

Note: The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labor freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.

Sources of General Economic Information

Ministries

Ministry of Agriculture and Rural Development
Ministry of Foreign Affairs
Ministry of Industry and Trade
Ministry of Communications
Ministry of Construction and Housing
Ministry of Finance
Ministry of Tourism

Statistical Office

Central Bureau of Statistics

Central Bank

Bank of Israel

Stock Exchange

Tel-Aviv Stock Exchange

Other Useful Resources

Economic information from the Ministry of External Affairs

Main Online Newspapers

Globes
Haaretz

Economic Portals

Port2Port, Israeli Trade Portal

Political Outline

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. This is the only Jewish state in the world.

Executive Power

The President is Head of the State and he is elected by the Parliament of the country for a seven year term. His role is essentially ceremonial. The President chooses the leader of the party or majority coalition in the parliament to exercise the functions of the Prime Minister, for a four year term. The Prime Minister is head of the government and it is he who holds the executive power, namely the execution of the law and management of current affaire of the country. The Cabinet is chosen by the Prime Minister before being approved by the Parliament.

Legislative Power

The legislative power is Israel is unicameral. The parliament consists of 120 members, elected by universal suffrage universal for a four year term. The parliament can decide to be dissolved by a simple majority, during a censure motion. The Prime Minister cannot directly dissolve the parliament, he cannot veto it. The Israeli citizens have considerable political rights.

Main Political Parties

The Israeli political system is based on proportional representation, which allows having a system with several parties. No one is in a position to solely assume power,which forces them to cooperate to form coalition governments. The main political parties of the country are :
- Kadima : centrist party, which advocates fixing the borders with the future Palestinian State;
- The Workers Party (Havoda) : left center zionist political party;
- Le Likoud : right nationalist party which draws its roots from the Zionist movement
- Shas : advocates ultra-orthodox Judaism.

Current Political Leaders

President: Shimon PERES (since July 2007)
Prime Minister: Binjamin NETANYAHU (since March 2009) as head of the coalition government

Next Election Dates

Presidential: 2014 ; legislative : 2013.

Indicator of Freedom of the Press

World Rank:

92/179

Evolution:

6 places down compared to 2010

Source: Worldwide Press Freedom Index 2011, Reporters Without Borders

Note: The world rankings, published annually, measures the violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position is assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire sent to partner organizations,150 RWB correspondents, journalists, researchers, jurists and activists of human rights, including the main criteria - 44 in total - to assess the situation of press freedom in a given country. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).