The Israeli Economy Towards 2014

Polish Israeli Business Forum – November 2013

Dan CatarivasManufacturers Association of Israel (MAI)

Federation of Israeli Economic Organizations (FIEO)

• Manufacturers Association of Israel

• Federation of Israeli Chambers of Commerce

• Association of Contractors & Builders in Israel

• Farmers’ Federation of Israel

• Association of Banks of Israel

• Israel Diamond Manufacturers Association

• Israel Hotel Association

• General Association of Merchants in Israel

• Association of Life Insurance Companies of Israel

• Association of Craft and Industry in Israel

• National Federation of Trade in Israel

• Cinema Owners Association in Israel

• Israel Federation of Independent's Organizations – LAHAV

• Association of Security Enterprises in Israel

• Israeli Cleaning and Maintenance Union

Manufacturers Association of Israel (MAI)

Established in 1921An Independent private organizationSelf-FinancedIsrael’s largest and most influential economic organizationLargest employers’ organization, representing 90% of the industrial output President of MAI is also the President of the Federation of Israeli Economic Organizations (FIEO)“The Voice of the Industry”

President

Jerusalem BranchSouthern BranchHaifa Branch

Small & Medium

Factories Division

Labor & HR Division

Finance and Administration

Division

Economics Division

Association of Electronics,

Information & Software

Industries

Building Materials & Consumer

Goods Association

Chemical, Pharmaceutical

& Environmental Society

Metal, Electrical & Infrastructure

Industries Association

Food Industries

Association

Textile & Fashion

Industries Association

Director General

Communications Division

Foreign Trade & International

Relations Division

Start-Up Unit

Kibbutz Industries

Association

• GDP ($ Billions) 240

• Population (8/2012, Millions) 7.9

• GDP per Capita ($) 30,357

• Foreign Trade (% of GDP) 77%

• Total Exports (% of GDP) 38%

• Unemployment (9/12) 6.8%

• Business Sector Share in GDP 72%

• Industry Share of Business Sector 20%

The Israeli Economy 2012 Facts & Figures

The Israeli Economy Main Characteristics

Export Oriented GrowthTechnologically Advanced & Hi-Tech Oriented

High Skilled Human Capital

Entrepreneurial Culture

Incentives for R&D & Investment

A Growing Economy in an Era of DeclineGrowth in Selected Developed Economies 2011-2012

Source: OECD-3

-2

-1

0

1

2

3

4

5

0.60.4

0.9

1.7

1.1

3.1

3.9

1.8

-0.7

2.6

3.6

1.8

3.7

4.6

-2.2

-1.3

-0.1

0.2 0.2

0.91.2

1.41.6

22.2 2.2

3 3.1

2011

2012

GDP GDP per Capita Business Sector GDP

5.4%

3.6%

6.3%

4.1%

2.2%

4.4%

1.1%

-0.7%

0.5%

4.8%

2.9%

5.3%

3.5%

1.7%

3.4%

2.7%

0.9%

2.3%

- - 2012 Est. 2013 Frcst.

The Israeli EconomyReal Annual Changes

Rapid Growth of the Economy

4.6%

2.4%

Aagr: 4.2%

Relatively Low Public Debt Ratio

Source: IMF Fiscal Monitor, October 2012.

4.0%

3.4%3.0% 2.9%

1.6%

6.0%

5.5%

2.9%

2.0%

3.0%

3.6%

1.8%

1.0%

0%

2.2%

5.2%

3.7%3.3%

4.2%

3.5%

2013 Frcst.

Target Deficit Actual Deficit

Government's Budgetary DeficitAs Percent of GDP

3.4%

Government Budget Deficit

External shock

External shock 5%

Shadow Economy Est. % of unreported transactions from 2007 GDP

Source: New Estimates for the Shadow Economies all over the World" by Friedrich Schneider, Andreas Buehn, and Claudio E. Montenegro, 2010

9 9.112.1 13.2 13.2 14 14.3 15 15.7 16.7 19 20.1 21.7 23

27.4 27.8 29.1 3135.2 37

43

72.5

0

10

20

30

40

50

60

70

80

Relatively Low Unemployment

Source: OECD

4.1

6.97.6 8.0

26.9

4.1

6.56.7 7.8

27.8

0

5

10

15

20

25

30

%

Current (May 2013) Projected (Q4 2014)

Q2-2011 Q3-2011 Q4-2011 Q1-2012 Q2-2012 Q3-2012 Q4-2012 Q1-2013 Q2-20132011 2012 2011 2012 2013

0

2

4

6

8

10

12

5.6

6.9

5.5 5.6 5.4

6.9 6.9 6.9 6.96.6 6.8

9.6

10.4

9.59.7

9.910.1

10.4 10.510.7 10.8 10.9

Israel European Union (28 countries)

UNEMPLOYMENT RATES

*OECD StatExtracts

High Share of ICT in the Business Sector

ICT= Information & Communications Technologies, 2008

Source: Israel CBS

16.1

13.913.0

12.2

10.49.9 9.69.0 9.0 8.8 8.8 8.2 8.2 8.1 7.8

7.2 7.1 7.1 6.7 6.4 6.3 6.2 5.9 5.8 5.7 5.75.0

3.7

ICT Sector GDP, Out of The Business Sector GDP 2008

2010

15

.7%

Relatively Young Population

Source: CIA Factbook

18.1

22.625.5

27.729.7

37.238.8

40.3 40.6 40.6 41.3 41.4 41.5 41.844.2

45.7 45.8

0

5

10

15

20

25

30

35

40

45

50

Median Age in Years - Country Comparison

Median Age (Years) of Population

Eurostat and CIA Factbook statistics

Israel EU

29.7

41.2

Demographics

0-14 years 15-24 years 25-54 years 55-64 years 65+ years

Israel 0.273 0.157 0.377000000000001

0.0880000000000001

0.105

EU 0.1542 0.1139 0.4232 0.1267 0.1821

3%

8%

13%

18%

23%

28%

33%

38%

43%

Israel

EU

Age, % of the Population

OECD Statistics

Energy & Water Consumption

Area Electricity consumption (kWh/ capita)

Carbon dioxide emissions

(CO2/ capita)

Freshwater use

(abstraction m3/ capita)

Freshwater intensity of use (abstraction as % of internal resources)

OECD 8226 9.95 840 10.3

ISRAEL 6927 8.66 220 86.4

Source: http://www.iea.org (2013; data from 2009-2012)

Employment Gaps Between Different Male Populations

Foreign Direct Investments in Israel (Billions $)

7

1.8 1.6

3.32.9

4.8

15.3

8.8

10.9

55.5

11.4

5.2

0

2

4

6

8

10

12

14

16

Jan-Sep 12

Israeli Innovationabove G7 countries since mid- 1990s

World Leadership in Civilian R&D Investments

Source: Israel CBS

4.3%3.9%

3.6%3.3% 3.3%

2.7%2.5%

2.2%2.0%

1.8%1.6%

1.3% 1.3%1.1%

Israel is The World Leader in Civilian R&D InvestmentAs Percentage of GDP, 20

201

4.%

Global R&D and Innovation Center

Israeli InnovationDisk-on-Key (Flash Memory) by

SanDisk

PillCam (aka capsule endoscopy) by Given Imaging

Copaxone (immunomodulator drug for treating multiple sclerosis) by Teva

ICQ (instant messaging program) by Mirabilis

Israeli InnovationFirewall (traffic filtering software) by

Check Point

Irrigation Systems by Netafim

Solar energy

Waze navigation + real-time traffic analysis and reporting application

Israeli InnovationEpilady (Epilator) by Mepro, Kibbutz

HaGoshrim, 1986

Skype Technology (Voice over Internet Protocol) by VocalTec

Cherry Tomatoes (Tomaccio tomatoes) by Prof. Keidar & Prof. Rabinovitch, Hebrew University, 1973

The main reason of 2011 protests: High Cost of Living

25.1%

23.4%

15.3%

-5%

0%

5%

10%

15%

20%

25%

30%

Jan. - Jun. 11'

Food Price

Housing Price

Nominal Wage

ʭʩhʥ́ʤʭʩyʩʧʮʤʬʥʮʬʷʹ ʮʡʲ ʶʥʮʮʤy ʫ́ ʤ̋ ʥʧʺ ʴ ʺ ʤCumulative change rates compared to 2006 average

Major Challenges

Inputs Costs

Local Economy

Global Economy

Exports Profitability

State Budget

Bureaucracy, Regulation & Industrial Relations

Evolution of Israel’s Export, 1980-2012(in B$, Including diamonds and services)

613

2031 28 28 30

37 40 4451

5846

5664 61

3

5

8

1613 12

13

1517

18

20

24

21

24

27 30

Services

Goods

-26%-22%

-20% -18%-15%

-12%-10%

3%6%

20% 20%

Japan China Malaysia Israel Canada TaiwanEuro Area Korea UK Mexico India

Israel: A Sharp Revaluation Compared to Main CompetitorsThe Change in The local Exchange rate Against The Dollar,

1.1.2006-15.1.2013($=3.734 NIS)

Local Currency Exchange Rate Compared to Main Competitors

30

-22%

=$3.6 NIS

ISRAEL

7 Free Trade Agreements with 39 countries Allowing products to enter without duty

Canada

U.S.A

Mexico

Turkey

E.F.T.ASwitzerland Norway, Iceland, Liechtenstein

MERCOSURBrazil, Argentina,

Uruguay , Paraguay

E.U. (28 Countries)

India

Colombia

China S. Korea

Negotiated / Considered

Panama

Ukraine

31

Israeli Industrial Goods Export by Continent 2012 (excl. diamonds)

European Union

31%$ 14.3 B

Rest of Europe

7%$ 3.3 B

Asia21%

$ 9.5 B

Africa3%

$ 1.4 B

North America26%

$ 12 B

Latin America5%

$ 2.2 BRest of the World

7%$ 3 B

Total : $ 64895.1 Billion Total : $ 45.7 Billion

Industrial Goods Import by Continent 2012 (excl. diamonds)

European Union

34%$ 22.5 B

Rest of Europe

8%$ 5.5 B

Asia20%

$ 13.2 B

Africa1%

$ 0.4 B

North America15%

$ 9.2 B

Latin America2%

$ 0.8 BRest of the World

20%$ 13.5 B

Total : $ 64895.1 Billion Total : $ 64.9 Billion

Chemical Products 34%

Machinery & Electrical Equipment

29%

Optical & Photographic Instruments

9%

Plastics & Rubber 5%

Base Metal Articles 5%

Vehicles & Transport Equipment

4%

Other14%

2012 Industrial Goods Import by Sectors

(excl. diamonds)

Total : $ 64.9 Billions

Total : $ 64.9 Billions

2012 Industrial Goods Export by Sectors

(excl. diamonds)

Total : $ 45.67 Billions

Total : $ 45.67 Billions

Mineral Products25%

Machinery & Electrical Equipment

24%

Chemical Products 10%

Vehicles & Transport Equipment

9%

Base Metal Articles 6%

Plastics & Rubber 4%

Other22%

Israeli Bilateral Trade with EU 2008-2012

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

18,843

22,417

13,802 14,219

34,653 38,648

Imports to Israel from EU Exports from Israel to EU Bilateral trade volume, excl. diamonds

Top Export Destinations in EU 2012(excl. diamonds)

Total : 14.3 $ Billion

Israeli – Polish Bilateral Trade 2009 – 2012 (million $ excl. diamonds)

2009 2010 2011 20120.0

50.0

100.0

150.0

200.0

250.0

300.0

201.2219.0

250.3 248.9

169.8

237.3 238.7

200.6

Israel's export to Poland Poland's export to Israel

Israeli Industrial Export to Poland 2012 (excl. diamonds)

Machinery, Electrical Equipment, Image and

Sound Recorders and Their Parts

38.1%

Products of the Chemical or Allied Ind. 24.9%

Plastics, Rubber and Articles Thereof6.9%

Prepared Foodstuffs 6.6%

Base Metals & Articles Thereof5.5%Other

18.0%

Total Export: 248.9 M$

Polish Industrial Export to Israel 2012 (excl. diamonds)

Machinery, Electrical Equipment, Image and

Sound Recorders and their Parts25%

Prepared Foodstuffs 23%

Animal Products11%

Products of the Chemical or Allied Ind.

11%

Miscellaneous Manufac-tured Articles

6%Base Metal Articles

5%

Other19%

Total Export: 200.6 M$

Thank you!

Dziękuję bardzo!

Dan CatarivasForeign Trade & Int’l Relations Division Director

Manufacturers Association of Israel (MAI)

danc@industry.org.il