The document provides an economic report from the Ministry of Finance of Israel for the second quarter of 2011. It highlights that international organizations have raised their forecasts for growth in the Israeli economy. It also outlines new plans to provide aid and export financing, the privatization of the port of Eilat, and approval for new natural gas field developments. Robust activity in Israel's research and development sector is also noted.
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Economic Highlights Newsletter, Q2 2011
1. STATE OF ISRAEL
MINISTRY OF FINANCE
International Affairs Department
July 2011
Economic Highlights
2nd Quarter 2011
Website: www.financeisrael.mof.gov.il Follow us on Twitter
Email: financeIsrael@mof.gov.il Follow us on Linkedin
Table of Contents
Headlines ......................................................................................................................... 1
Latest News ..................................................................................................................... 2
Monetary News and Capital Market ............................................................................... 4
From the Press ................................................................................................................ 5
Environmental Economy News ...................................................................................... 6
Economic Figures ........................................................................................................... 7
We Welcome Your Feedback.......................................................................................... 8
Headlines
Raised Growth Forecasts for the Israeli Economy Page 2
Robust and Determined: News from Israel's R&D Sector Page 3
Moody's, Fitch Left Israel's Ratings Unchanged Page 4
Israel Ranked 17th in IMD World Competitiveness Yearbook 2011 Page 5
Gallup Survey Finds Israel 7th Most Thriving Country Page 5
New and Bigger Desalination Plant to be built in Sorek Page 6
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2. Latest News
Government of Israel New Tender for the Red
2010 Financial Line of the LRT and
Statements Released Metro in Tel Aviv
by the Accountant General in Includes monitoring the
the Ministry of Finance. execution of engineering.
Press Release with Main Data Read More
IMF, OECD Raise Forecasts for the Israeli Economy
The International Monetary Fund increased its growth prediction for the
Israeli economy to 3.8% in 2011 and 2012.
Also, The OECD predicts that Israel will achieve 5.4% GDP growth in
2011 and 4.7% in 2012.
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The Israeli economy grew 4.7% in 2010, with a 7.6% growth in the 4 quarter of 2010. The Bank of Israel has
forecast the Israeli economy to grow 4.5% in 2011 and 4.0% in 2012.
(Source: Ministry of Finance, Ministry of Industry, Trade and Labor, IMF, OECD, Globes)
Ministry of Finance Launches NIS 2.75 Billion Aid Plan for Exporters
Minister of Finance, Dr. Yuval Steinitz, has asked the Knesset Finance
Committee to approve a framework of guarantees for exporters in order to
launch a new plan and expand the scope of activity of Ashra Ltd.
The goal of the plan is to expand Israel’s export activity out of recognition of the
importance of exports as a growth engine for the economy. The NIS 2.75 billion plan
will expand the financing solutions available to exporters and will also increase the
basket of services offered by Ashra, the government insurance company.
The plan includes two steps for expanding the medium and long-term credit offered to Israeli exporters:
1. State guarantee for export deals in the medium range – the Top up 2 Plan.
2. Expanding the scope of activity of Ashra Ltd.
Read More
(Source: Ministry of Finance)
Privatization of the Eilat Port is Underway
The Government Companies Authority Issued a Public Announcement for the Sale of
the State's Holdings in the Eilat Port Company. The port of Eilat handles
approximately 6% of Israel's maritime trade, and employs around 130 workers.
Minister of Finance, Dr. Yuval Steinitz, said: "The privatization of the Eilat port will
increase exports and imports through Israel's southern gateway and strengthen the
city of Eilat."
Read More
(Source: Ministry of Finance)
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3. Permission for 'Noa North' and 'Or' Gas fields Development Granted
In June, the Ministry of National Infrastructures has given permission to Nobel
Energy to begin developing the 'Noa North' natural gas field, located near the town
of Ashkelon and the Gaza Strip coast. The ministry has instructed the company to
submit its drilling and development plans before the middle of July.
The Ministry of National Infrastructures also ordered Israel Oil Co. to develop the
'Or' gas structure, which is part of the Med Yavne license. Med Yavne is adjacent to
the Noa and Yam Tethys fields off the coast of southern Israel. The company was instructed to present a drilling
and development plan by August 1.
(Source: Ministry of National Infrastructures, Globes, Ynet)
Robust and Determined: News from Israel's R&D Sector
Israel is well known for its robust R&D sector, and in 2011, Israel kept its
st
position as 1 in the world for total expenditures on R&D as a % of GDP (IMD
WCY 2011). Also, Israel holds the EUREKA (the pan-European network for
market-oriented, industrial R&D) chairmanship for 2011.
Following are several news items from Israel's R&D Sector in the last 3 months:
Israel to be 1st non-Euro member of elite Shimon Peres to raise funds for Israeli brain
research club research
The cabinet is expected approve the $15 m. annual The President will set up an NPO for brain research
entrance fee that will allow it to become part of the led by Dr. Rafi Gidron.
European Organization for Nuclear Research.
AMD to establish Israel R&D center in Tel
Israel signs R&D cooperation agreement with Aviv
Shanghai The R&D center is based on 3D graphics developer
The Shanghai Municipality has marked several Graphic Remedy, acquired a few months ago.
industries that it wants to promote through increased
R&D activity in the coming years. World Leader EMC to Open R&D Center in
Beer Sheva
Israel, Taiwan extend scientific collaboration The R&D center is based on 3D graphics developer
Israel and Taiwan will likely expand academic Graphic Remedy, acquired a few months ago.
exchanges in the fields of marine science and
robotics following the signing of a science EURAXESS Israel launches portal for mobile
cooperation deal. researchers
The portal contains all necessary information for a
Marvell to invest $200m in Israel R&D center researcher moving to Israel.
Marvell CEO Dr. Sehat Sutardja and VP Weili Dai
will officially announce the investment at a meeting General Electric to set up new Israeli R&D
with President Peres. center in Haifa
The R&D center will do basic research in medical
devices, clean energy, and water technologies.
Read More:
Israel Ranked 17th in IMD World Competitiveness Yearbook 2011
Eureka – Israel Chairmanship Website
(Source: Ministry of Finance, Ministry of Industry, Trade and Labor, Ministry of Foreign Affairs, Eureka, Jerusalem Post, Globes,
Focus Taiwan)
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4. Monetary News and Capital Market
Barclays Commends Israel's Attractive Market Valuation
Barclay's chose the Israeli Currency (Shekel) as their foreign exchange pick for the EMEA (Europe, Middle
East and Africa).
According to a Barclay's report on emerging markets from June: "despite a 13% sell-off from the January highs,
Israel benefits from strong economic growth and low volatility, and the shekel is our foreign exchange pick in EMEA,
which augers well for equity markets."
(Source: Barclay's, Globes)
Moody's, Fitch Left Israel's Ratings Unchanged
Further Significant Support for the Israeli Government's Economic Policy: Moody's Credit Rating
Agency Left Israel's A1-Stable Rating Unchanged, Fitch Ratings Left Israel's A Stable Rating
Unchanged.
Moody's representatives noted in their report that the A1 rating balances Israel's
economic and financial strength with the geopolitical challenges it faces. Vice
President in Moody's Sovereign Risk Group, Mr. Anthony Thomas, said in the
report that the Israeli economy is strong and dynamic and notes favorably the
coherent macroeconomic policy implemented by the Israeli government.
Fitch noted in their announcement that "the affirmation reflects the resumption of the downward trend in
public deficits and debt, the robust outlook for Israeli growth, and a strengthening in the sovereign's
external balance sheet." Ms. Purvi Harlalka, director of Fitch's Middle East and Africa Sovereign Ratings
Group, said that "these positive trends mitigate concerns surrounding an overheating housing market and
a more difficult geopolitical environment.
Read More:
Moody's International Credit Rating Agency Releases Its Annual Credit Report on Israel, Leaving the
Country's A1-Stable Rating Unchanged
Fitch Ratings Supports Israel's Economic Policy, Leaving the Country's A Stable Rating Unchanged
(Source: Ministry of Finance, Moody's, Fitch Ratings)
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5. From the Press
Israel Ranked 17th in IMD World Competitiveness Yearbook 2011
Israel keeps its position as 17th in the overall ratings, as it was ranked 17th also in 2010 .
The International Institute for Management and Development (IMD) is a world-leading business
school. IMD publishes the World Competitiveness Yearbook, which ranks and analyzes how a
nation’s environment creates and sustains the competitiveness of enterprises.
In IMD's World Competitiveness Yearbook (WCY) in 2011, Israel is 1st in the world in total
expenditures of R&D as % of GDP, entrepreneurship, central bank policy and scientific
research. Also, In IMD WCY 2011 Israel is 2nd in the world in access to venture capital and
public expenditure on education. Israel's weak ratings were in immigration laws, governmental
debt as a % of GDP, long term unemployment and cost of living.
Read More
(Source: IMD, Ministry of Finance, Federation of Israeli Chambers of Commerce)
Gallup Survey Finds Israel 7th Most Thriving Country
According to a survey conducted by Gallup Institute, 63% of respondents in Israel
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said they were happy with their lives, ranking Israel as 7 out of 124 countries.
Gallup classifies respondents' well-being as "thriving," "struggling," or "suffering,"
according to how they rated their current and future lives on a ladder scale with steps
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numbered from 0 to 10. In 2010, Israel was ranked by Gallup and Forbes as the 8
nd
happiest place in the world to live in. Also, Israel was ranked 22 in a 2010 Newsweek
survey of "true national champions."
Read More:
Gallup Global Wellbeing Survey findings
th
Israel ranked 8 by Forbes and Gallup in 2010
nd
Israel ranked 22 by Newsweek in 2010
(Source: Gallup, Ynetnews, Jerusalem Post, Forbes, Newsweek)
Israeli Venture Capital HSBC: Israeli Economy is Robust
Reaches Pre-Crisis Level
HSBC analyst Jonathan Katz described the
According to PwC Israel Money- state of the Israeli economy as "robust."
Tree Report, Israeli VC backed companies raised
$342 million in Q1 2011, double the amount Katz also wrote that "the fiscal budget
raised in the corresponding quarter of 2010, and performance in the first three months of the year
34% more than in Q4 2010. This was the largest has been a pleasant surprise, reflecting a budget
amount raised since the collapse of Lehman surplus of NIS 2 billion as compared to a budget
Brothers in Sep. 2008. deficit of NIS 3.6 billion in Q1 2010."
Also, IVC and KPMG Report finds that Israeli Katz projected that the fiscal target of 3% of GDP
high-tech capital raising in Q1/2011 rose by 39% will be met in 2011, and that governmental debt
from Q4 2010, as Life sciences sector continues will decline from 75% of GDP in 2010, to 73% in
to lead capital raising. 2011 (HSBC estimate), and possibly lower.
(Source: Globes)
(Source: Globes, PwC, IVC Research Center)
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6. Environmental Economy News
One of the Biggest Desalination Plants of its Kind to be built in Sorek
On Completion of the Plant, the Desalinated Water Will Constitute over 65% of
Israel’s Domestic Water Consumption.
The financing agreement for the construction and operation of the seawater
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desalination plant in Sorek was signed on May 23 . The plant, with an output of 150
million cubic meters per year and a cost of approximately USD 400 million, is
expected to be the second largest in the world.
Photo: SDL
SDL was chosen by the Finance Ministry’s Inter-Ministerial Tenders Committee for Seawater Desalination as
the winner of the tender for financing, planning, building and operating the plant in Sorek. The plant, whose
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construction will be completed in 2013, is the 4 BOT (Build-Own-Transfer) project to be built in cooperation
with the private sector. It will operate using reverse osmosis technology.
The plant constitutes a global achievement in light of its record output and the low price of the desalinated
water, just NIS 2.01 per cubic meter, representing a significant saving for Israel’s water sector.
Read More
(Source: Ministry of Finance, Ynetnews, SDL)
Green Desalination Process Put to the Test by IDE in China
Israeli desalination company IDE Technologies has introduced a greener way to pull
salt from water. Putting it to the test in China, the Israeli company has created a win-
win solution for the environmentally conscious Chinese: using runoff steam from a
power plant to help run the desalination plant. The result is water for the power plant,
drinking water for the community and salt to sell.
IDE also built the IDE MED desalination plant in Tianjin, China. According to the CEO of IDE, Mr. Avshalom
Felber, The Israeli-built IDE MED is the country’s largest and greenest one yet. Using a process called multi-
effect distillation (MED), the plant is claimed to be 50 percent more energy efficient than any other thermal
desalination plant today.
Read More
(Source: Israel NEWTech, Israel Trade Commission in Sydney, Australia)
Arava Power Inaugurates Israel's 1st 15th Annual Clean Tech Expo to be Held
Solar Field in the Negev in Israel in July
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The 1 Israeli solar The 15 annual Clean
field is spread over 80 Tech Expo in July will
dunam in Kibbutz highlight the Israeli
Ketura, and consists of solutions for energy &
18,500 photovoltaic water needs of Brazil,
panels, that are Russia, India & China.
expected to produce Read More:
about 9 million kilowatts per year. The Israel
Electric Corporation will pay Arava Power NIS 1.5 CleanTech 2011 Expo website
per kilowatt hour. Article in Ministry of Foreign Affiars website
(Source: Globes, ISRAEL21C) (Source: Ministry of Foreign Affairs)
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7. Economic Figures
Economic Data
Data is calculated at an annual Year-on-Year rate of change
Data from previous editions is constantly being updated
See more extended economic data in our Economic Highlights PowerPoint Presentation
2009 2010 Q4 2010 Q1 2011
GDP Growth 0.8% 4.7% 7.6% 4.7%
Business GDP Growth 0.2% 5.4% 8.7% 5.8%
Private Consumption Growth 1.4% 1.4% 8.8% 6.8%
Public Consumption Growth 2.2% 2.2% 4.7% -5.7%
GDP Per Capita, Based On PPP For 2009: 29,531$
Consumer Price Index
In 2008 prices
May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr
2010 2010 2010 2010 2010 2010 2010 2010 2011 2011 2011 2011
99.5 99.8 100.3 100.8 101.0 101.3 101.4 101.8 102.0 102.3 102.5 103.1
104
103
102
101
100
99
98
97
5.2010 6.2010 7.2010 8.2010 9.2010 10.2010 11.2010 12.2010 1.2011 2.2011 3.2011 4.2011
Foreign Trade
Goods and Services
2009 2010 Q4 2010 Q1 2011
Import Growth -14.1% 12.6% 15.6% 15.9%
Export Growth -12.5% 13.6% 11.3% 16.0%
(Source: Ministry of Finance, Central Bureau of Statistics, IMF)
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8. Balances
2010 Q4 2010 Q1 2011
Current account Surplus 2.9% 1.0% 0.6%
As % of GDP
Budget Deficit 3.7% -- --
Central government
Gross Debt (% of GDP) 76.4% -- --
General government gross financial liabilities
Investments
2010 Q3 2010 Q4 2010 Q1 2011
Gross Domestic Capital Formation 1.9% 2.1% 20.0% 33.3%
Gross Investments in Fixed Assets 12.6% 20.8% 19.7% 23.7%
Gross Israeli Investments Abroad (Billion$) 27.7$B 3.9$B 10.1$B 7.0$B
Gross Foreign Investments in Israel (Billion$) 17.6$B 3.7$B 6.9$B 5.1$B
Gross Foreign Direct Investments (Billion$) 5.2$B 1.7$B 2.4$B 2.6$B
See more extended economic data in our Economic Highlights PowerPoint Presentation
(Source: Ministry of Finance)
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