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Economic Highlights Newsletter, Q3 2011

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Israel’s Economic Highlights Newsletter, Q3 2011

Israel’s Economic Highlights Newsletter, Q3 2011


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  • 1. STATE OF ISRAEL MINISTRY OF FINANCE International Affairs Department September 2011 Economic Highlights 3rd Quarter 2011 Website: www.financeisrael.mof.gov.il Follow us on Twitter Email: financeIsrael@mof.gov.il Follow us on Linkedin Table of ContentsHeadlines ......................................................................................................................... 1Latest News ..................................................................................................................... 2Monetary News and Capital Market ............................................................................... 4From the Press ................................................................................................................ 5Environmental Economy News ...................................................................................... 6Economic Figures ........................................................................................................... 7We Welcome Your Feedback.......................................................................................... 8 Headlines Interview with the Minister of Finance on OECD Observer Page 2 The Committee on Increasing Competitiveness in the Economy has Page 2 submitted its interim recommendations Standard & Poors Upgraded Israels Credit Rating to A+ Page 4 Israel Ranked 22nd in Global Competitiveness Report for 2011-2012 Page 5 Israel Praised for its Innovation and Entrepreneurship Page 5 Agreement for the Construction of a Desalination Plant in Ashdod Page 6 -1- 1 Kaplan St. Jerusalem 91030, P.O. Box 3100, Tel: 02-5317200, Fax: 02-5695349 English: www.financeisrael.mof.gov.il Hebrew: www.mof.gov.il
  • 2. Latest News Israels Prospectus for OECD Observer Q2 2011 Special 2010 available on our Focus on Israel Interview with Israels website summarizes the Minister of Finance articles on Israels Israeli economic and financial economic strategy, banking sector, start- positions. ups, and more. Prospectus 2010 Read MoreThe Committee on Increasing Competitiveness in the Economy has submitted its interim recommendations The Committee on Increasing of Competitiveness in the Economy, appointed by the Prime Minister, the Minister of Finance and the Governor of the Bank of Israel has concluded the interim stage of the formulation of its recommendations at the end of September. The Committee has been requested to examine the effect of the existing structure of the economy on the level of competition in the various sectors of the economy, on its financial stability and on its economic efficiency. The Committee has been asked to recommendadvisable policy measures with emphasis on the control of real companies over financial companies, the controlof a public company using a pyramid holding structure and the manner of the allocation of public assets. Full Press Release Presentation on the Principal Recommendations of the Committee(Source: Ministry of Finance, Prime Ministers Office) Social Protests over the Cost of Living Sweep Israel The last three months were times of unseen social protests over the cost of living in Israel. The government established a special committee to address the problems raised by the public. After several specific demonstrations over prices of several products in Israel, such as the price of fuel and the price of cottage cheese, a protest over housing prices in Israel evolved into a cross-nation general protest over the cost of living, including the cost of basic grocery consumption products, housing, the price of raising children, and more. What began as a small protest tent in Tel Avivs luxurious Rothschild Boulevard evolved into major "tent cities" all across the country. The protest movement was comprised of institutional bodies such as the students union, as well as non-institutionalized sub movements. This coalition of movements carried out massive demonstrations calling for social justice. The biggest demonstration so far was held on September 3, with estimations of more than 400,000 participants across Israel. 400,000 people are no less than 5% of Israels total population. On August 7, Prime Minister Benjamin Netanyahu appointed a professional committee for socio-economic change, chaired by Prof. Manuel Trajtenberg, in order to hold a broad dialogue with different groups and sectors within the public, listen to the distress and to proposals, and make recommendations that will be submitted to the Social and Economic Cabinet chaired by the Minister of Finance, Dr. Yuval Steinitz. The Trajtenberg Committee for Socio-Economic Change is comprised of government officials, academia representatives and social entrepreneurs. (Source: Ministry of Finance, Prime Ministers Office, Ynet) -2- 1 Kaplan St. Jerusalem 91030, P.O. Box 3100, Tel: 02-5317200, Fax: 02-5695349 English: www.financeisrael.mof.gov.il Hebrew: www.mof.gov.il
  • 3. Investment Commitments for More than NIS 400 Million Received from Institutional Bodies in Israel to Encourage Institutional Investments in the High-Tech Industry Just 7 months after launched, the program to encourage investments by institutional bodies in high-tech has succeeded in garnering institutional commitments for investing more than NIS 400 million in venture capital funds. The stated goal was to raise a sum of NIS 800 million from Israeli institutional bodies during the years 2011-2013. Full Press Release(Source: Ministry of Finance) USD 400 Million Raised by the Accountant General in a Private Placement to One of the Worlds Largest Asian Investor The Accountant General at the Ministry of Finance has completed a USD 400 million private placement of one-year government bonds to one of the worlds largest Asian investors, who is considered to be a strategic investor in the global capital markets and for whom this is the first investment in Israeli government bonds. Full Press Release(Source: Ministry of Finance) Bill for Promoting Competition in the Credit Card Market Approved The Knesset approved the bill submitted by the Ministry of Finance to amend the Banking (Licensing) (Clearing Credit Card Transactions) Law. The bill is intended to correct failures in the Israeli credit card market and to increase competition in the clearing sector, and is expected to reduce payments transferred by business owners to the credit card companies, with a resulting reduction in product prices for the consumer. Full Press Release(Source: Ministry of Finance) Tax Treaties Signed between Israel and Malta and initialed with Panama A treaty for the avoidance of double taxation has been signed between Israel and Malta, and a treaty for the avoidance of double taxation has been initialed between Israel and Panama. The treaties signed include a clause for the exchange of information between the tax authorities of both countries and Israel, based on the model treaty of the OECD. The treaties will enter into effect on completion of ratification proceedings in the two countries. Full Press Release(Source: Ministry of Finance) Government Companies OECD Report Finds: Israel Tops Authority Published its all other OECD Countries in Report for 2010 The report Venture Capital According to indicates an increase of Entrepreneurship at a Glance 2011, approximately NIS 3 billion in Israeli venture capitalists allocate more revenues compared to 2009. financing to young firms than other OECD members. Press Release OECD Press Release on the Entrepreneurship at Presentation on the Report a Glance 2011 report, mentioning Israel -3- 1 Kaplan St. Jerusalem 91030, P.O. Box 3100, Tel: 02-5317200, Fax: 02-5695349 English: www.financeisrael.mof.gov.il Hebrew: www.mof.gov.il
  • 4. Monetary News and Capital Market Standard & Poors Upgraded Israels Credit Rating to A+This action reflects S&Ps view of Israels improved economic policy flexibility, as a result of stronggrowth and careful macroeconomic management.Standard & Poors Ratings Services (S&P) raised its long-term foreign currencysovereign credit ratings on the State of Israel to A+/A-1 from A/A-1. At thesame time, S&P affirmed the local currency ratings at AA-/A-1+. Also, S&Psoutlook is stable, and the transfer and convertibility (T&C) assessment remainsat AA.S&P first upgraded Israels credit rating to A in 2007. In January 2009, it reaffirmed its decision, furthergiving Israels market a "solid" forecast. This August, S&P reiterated its A/A-1 sovereign credit rating forIsrael with a "Stable" outlook. However, in line with the downgrade of the US credit rating from AAA toAA+, S&P downgraded US guaranteed Israeli government bonds to AA+. With the decision to reiterateIsraels credit rating for 2011, S&P joined the two other major credit rating firms, Moodys and Fitch, asMoodys left Israels A1-Stable rating unchanged, and Fitch ratings left Israels A Stable rating unchanged.Then, S&P decided this September to raise Israels credit rating to A+.The decisions by all three major credit rating agencies to leave Israels rating unchanged, and especiallyS&Ps latest decision to raise Israels rating, provide Further Significant Support for the IsraeliGovernments Economic Policy.Minister of Finance, Dr. Yuval Steinitz, noted that "this is an impressive credit given to the Israelieconomy and its successful coping with the global economic crisis. This achievement of credit upgrade isespecially unique given the debt and massive unemployment crisis, which hurt many economies creditrating." Minister Steinitz also noted that "the fact that S&P mentioned the latest natural gas findings as apoint of strength for the Israeli economy indicated the importance of the work done by the Committee toExamine the Fiscal Policy on Oil and Gas Resources in Israel, Headed by Prof. Eytan Sheshinski." Theminister added that "Israel cannot rest on its laurels, as the on-going global crisis demands us to keep ourbudget frameworks and economic policies. Aa3/AA- A1/A+ A2/A A3/A- Baa1/BBB+ Baa2/BBB Baa3/BBB- 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 20 20 20 Moodys S&P Fitch Read More(Source: Ministry of Finance, Standard & Poors, Globes, Ynet) -4- 1 Kaplan St. Jerusalem 91030, P.O. Box 3100, Tel: 02-5317200, Fax: 02-5695349 English: www.financeisrael.mof.gov.il Hebrew: www.mof.gov.il
  • 5. From the Press Israel Ranked 22nd in Global Competitiveness Report for 2011-2012 Israel climbed 2 ranks from the previous Global Competitiveness Report of 2010-2011, nd from 24th to 22 . among Israels main strengths are capacity for innovation, high number of patents and availability of venture capital, which has "further contributed to making Israel an innovation powerhouse". According to the report, these elements have become stronger in the past year. Read More(Source: Ministry of Finance, World Economic Forum) Israel Praised for its Innovation and Entrepreneurship During the last 3 months, Israel was praised by several media and news networks from around the world for its innovation and enrepreneurship. Following are several selected items: CNBC: Innovation Nation CNBC describes Israel as a "small country of 7 million that has become a hi-tech powerhouse", and reports on "why its talent for enterprise is pivotal to Israels future". The Telegraph: Israel, the Start Up Nation, is Taking-on Silicon Valley The Telegraph reports that Israels strong technology start up scene has "correctly earned the tiny state its growing reputation as the world’s second Silicon Valley". Channel 4: The New Sillicon Valey Britains Channel 4 reports on Israel as the new sillicon valley, mentioning israeli innovations in the technology world, Israels R&D spendings (as a % of GDP), high- tech sector, venture capital attraction, and more. Wired UK: Europes Hottest Startup Capitals: Tel Aviv According to Wired UK, Tel Aviv is a hotbed of innovation, and so is included in their European Startups list. The report mentions, among others, the role of the Israeli military and the mandatory service in Israel as a major source of innovation, (Source: CNBC, Channel 4, The Telegraph, Wired UK) Hebrew University Ranked 57th in the World, Weizmann Institute named "Best Place to Work in Academia outside the United States" th The Hebrew University of Jerusalem has been ranked 57 in the 2011 Academic Ranking of World Universities (ARWU), conducted annualy by Shanghai Jiaotong University. Also, the Weizmann Institute of Science has once again been named "best place to work in academia between international institutions" in The Scientist magazines annual survey.(Source: Academic Ranking of World Universities, The Hebrew University of Jerusalem, The Scientist , Weizmann Institute of Science) -5- 1 Kaplan St. Jerusalem 91030, P.O. Box 3100, Tel: 02-5317200, Fax: 02-5695349 English: www.financeisrael.mof.gov.il Hebrew: www.mof.gov.il
  • 6. Environmental Economy News Agreement for the Construction of a Desalination Plant in the City of Ashdod The Ministries of Finance and National Infrastructures signed an agreement for the Ashdod desalination project with Mekorot Development & Enterprise, which will plan, build and operate the plant. The Ashdod plant is expected to produce 100 million cubic meters per year, and on its completion, desalination plants will supply around 75% of the domestic water consumption. Full Press Release(Source: Ministry of Finance, Ministry of National Infrastructure) Experts Call Israel a ‘Laboratory’ for Eco-Innovation “Israel is a laboratory of innovative policies and practices in many areas, including technologies, financing and project management,” said Mr. Jan Kubis, UN under-secretary general and executive secretary of the UN Economic Commission for Europe, during a special conference held by the commission in Tel Aviv this July. The conference included members of the UN Economics Commission, Israeli contributors and other experts from across the globe, who agreed that “Israel is a laboratory” for eco-innovation and can serve as a platform for larger countries looking to harness sustainable technology.(Source: Jerusalem Post) Memorandum of Understanding (MoU) on Water Technologies Cooperation Singed with the Brihanmumbai Municipal Corporation (BMC) in India The government, through the Ministry of Industry, Trade and Labor, will share with BMC its expertise on water management related issues, relevant technologies, research and .private sector colaborations. Indian officials mentioned that Israeli water technology is a platform for them to interact with "some of the worlds most innovative and technology driven companies as they are the global leaders in the water arena".(Source: Ministry of Industry, Trade and Labor, IBNlive) Cabinet approved renewable energy Israel Adopts Green Building target of 10% by 2020 Standards Israel has become the latest to announce an The Ministry of Environmental Protection and the ambitious target for renewable energy, as this Israel Standards Institution launched a national July the cabinet voted through a package of green building standard (Standard 5281). The measures designed to ensure the generation of Standard includes 9 fields: energy, land, water, 10% of energy from renewable sources by 2020. building materials, health and welfare, waste, The plan would result in over USD 5 billion of transport, construction site management and investment and deliver 1,550MW of renewable innovation. The standard is in line with advanced electricity capacity by the end of 2014 and international standards, yet adapted to Israel’s 2,760MW by 2020. climatic conditions and construction methods. (Source: Prime Ministers Office, Ministry of Industry, Trade (Source: Ministry of Environmental Protection, EarthTechling) and Labor, BusinessGreen) -6- 1 Kaplan St. Jerusalem 91030, P.O. Box 3100, Tel: 02-5317200, Fax: 02-5695349 English: www.financeisrael.mof.gov.il Hebrew: www.mof.gov.il
  • 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 Q1 2011 Q2 2011 GDP Growth 0.8% 4.7% 4.6% 3.3% Business GDP Growth 0.2% 5.4% 5.2% 1.9% Private Consumption Growth 1.4% 1.4% 9.0% 2.2% Public Consumption Growth 2.2% 2.2% 2.9% -4.4% GDP Per Capita, Based On PPP For 2009: 29,531$ Consumer Price Index In 2010 prices Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug 2010 2010 2010 2010 2011 2011 2011 2011 2011 2011 2011 2011 101.0 101.3 101.4 101.8 102.0 102.3 102.5 103.1 103.6 104.0 103.7 104.2105104103102101100 99 9.2010 10.2010 11.2010 12.2010 1.2011 2.2011 3.2011 4.2011 5.2011 6.2011 7.2011 8.2011 Foreign Trade Goods and Services 2009 2010 Q1 2011 Q2 2011 Import Growth -14.1% 12.6% 28.9% 13.6% Export Growth -12.5% 13.6% 12.0% 3.4% (Source: Ministry of Finance, Central Bureau of Statistics, IMF) -7- 1 Kaplan St. Jerusalem 91030, P.O. Box 3100, Tel: 02-5317200, Fax: 02-5695349 English: www.financeisrael.mof.gov.il Hebrew: www.mof.gov.il
  • 8. Balances 2010 Q1 2011 Q2 2011Current account Surplus 2.9% 0.6% -0.9%As % of GDPBudget Deficit 3.7% -- --Central governmentGross Debt (% of GDP) 76.3% -- --General government gross financial liabilities Investments 2010 Q4 2010 Q1 2011 Q2 2011Gross Domestic Capital Formation 1.9% 20.8% 37.0% 14.1%Gross Investments in Fixed Assets 12.6% 19.6% 26.1% 8.8%Gross Israeli Investments Abroad (Billion$) 27.7$B 10.1$B 5.8$B 4.6$BGross Foreign Investments in Israel (Billion$) 17.6$B 6.9$B 5.2$B 6.4$BGross Foreign Direct Investments (Billion$) 5.2$B 2.4$B 2.2$B 1.6$B See more extended economic data in our Economic Highlights PowerPoint Presentation(Source: Ministry of Finance) We Welcome Your Feedback Mr. Roni Hershkovitz Follow us on Twitter Director Overseas Economic Information Follow us on Linkedin International Affairs Department Ministry of Finance Subscribe our RSS Feeds Jerusalem Israel Subscribe our Newsletters Mr. Assaf Luxembourg Write us an Email Overseas Economic Information International Affairs Department Ministry of Finance Visit our Website Jerusalem Israel -8- 1 Kaplan St. Jerusalem 91030, P.O. Box 3100, Tel: 02-5317200, Fax: 02-5695349 English: www.financeisrael.mof.gov.il Hebrew: www.mof.gov.il

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