STATE OF ISRAEL MINISTRY OF FINANCE INTERNATIONAL AFFAIRS DEPARTMENT ECONOMIC HIGHLIGHTS 1 st Quarter 2010 Initial Conclusive 2009 Figures Included

Contents Economic Figures Balances International Comparisons Israel and the OECD International Treaties Relevant Sites Note: You can return to the beginning of each chapter by clicking the emblem of Israel on the top of each slide. Contact Us

Economic Figures GDP and Business GDP Major GDP Components Growth: Israel compared to the World Exports of Goods and Services Foreign Investments Unemployment & Participation Rates Inflation Rate Growth of Main GDP Components 2008 Main Economic Indicators Main Trading Partners Inflation Rate Worldwide BACK TO CONTENTS

*Using a public exchange rate of 1$ = 3.76NIS ** In current prices Main Economic Indicators 2009 Q Q Q Q Criteria GDP (current prices in $B)* 4.9%3.6%1.3%-2.7%0.7%4.0% Real GDP Growth Rate (%) -- None yet$28,473 GDP per Capita (PPP adjusted)** 2.9%1.7%-0.3%-4.4%-1.1%2.2% GDP per Capita Growth Rate (%, 2005 prices) 19.9 (42.3%) 18.2 (39.2%) 17.6 (38.1%) 17.6 (38.4%) 73.4 (39.5%) 83.3 (45.1%) Exports (Goods & Services)** $B* (As Percentage of GDP) 18.2 (38.8%) 17.7 (38.0%) 17.1 (37.0%) 16.9% (36.9%) 69.9 (37.6%) 81.3 (44.0%) Imports (Goods & Services)** $B* (As Percentage of GDP) 7.4%7.7%7.9%7.6% 6.1% Unemployment Rate (%) CONTINUE Source: Ministry of Finance, IMF

Source: Ministry of Finance Criteria 79.6%77.2%78.3%84.5%Total Gross Debt (Percentage of GDP) 42.7%42.9%44.0%44.8% Government Expenditure (Percentage of GDP) 3.7%0.7%2.9%5.1%Current Account Surplus (% of GDP) 3.9%3.8%3.4%-0.1%Inflation Rate (CPI, end of year) CONTINUE Main Economic Indicators

Source: Ministry of Finance Overseas Bonds Forecast Domestic Bonds TermRating Firm Rating A1 Stable A1Long Moody's P1-Short A Stable AA-Long Standard & Poor's A-1A-1+Short A Stable A+Long Fitch F1-Short Main Economic Indicators Moody's / S&P & Fitch Aa3/AA- A1/A+ A2/A A3/A- Baa1/BBB+ Baa2/BBB Baa3/BBB- CONTINUE All 3 rating firms have reaffirmed Israels rating, without any downgrade, during the global economic crisis in 2009.

GDP and Business GDP Annual rate of change (%), in Constant Prices In recent years, prior to the global economic3 out of 4 Quarter of 2009 crisis, the Israeli economy experienced high recorded growth, indicating growth rates a fast recovery from the global economic crisis Source: Ministry of Finance. CONTINUE

GDP Growth Israel compared to Advanced Economies* (Annual rate of change (%), in constant prices) * Weighted average: US – 39%, Euro area – 46.5%, Japan – 3%, UK – 5%, Asian Newly Industrialized countries – 6.5% Source: Ministry of Finance. Since 2004, Israels growth rate has exceeded the average growth rate of advanced economies. CONTINUE

Major GDP Components (Annual rate of change (%), in constant prices) Source: Ministry of Finance CONTINUE In 2009, due to the global economic crisis, Investment in Fixed Assets and Export of Goods and Services contracted severely. However, the strength and resiliency of Israel's economy in a time of crisis is demonstrated by the positive growth of both Private Consumption and Government Consumption during the same period. Global Economic Crisis

Source: Ministry of Finance Exports of Goods and Services ($B) CONTINUE

Israels Main Trading Partners (US$ Billions, excluding diamonds) Source: Central Bureau of Statistics 2009 Import Export 2008 Exports to the U.S. grew in 2009, as imports declined CONTINUE * Since July 1997 the data on trade with Hong-Kong is added to the data on China

Net Foreign Investments in Israel (In $ Billion) Source: Ministry of Finance CONTINUE

Unemployment and Participation (As % of Total Labor Force) Source: Ministry of Finance CONTINUE As Israel grows out of the global recession, since 2009: > unemployment is decreasing > participation in labor force is increasing

Inflation Rate (Rate of Change in CPI, end of year) Source: Central Bureau of Statistics, Ministry of Finance The Consumer Price Index (CPI) grew by 4.0% during * July 2009 index compared to July 2008 CONTINUE

Inflation Rate Worldwide (Annual rate of change in CPI for 2009, estimated) Sources: Ministry of Finance, IMF CONTINUE The Israeli economy demonstrated a high level of stability compared to other countries throughout the global economic crisis

2009Criteria + 0.7%Real GDP 0.0%Business GDP %Exports + 1.6%Private Consumption + 1.5%Public Consumption - 6.6%Investment in Fixed Assets Source: Ministry of Finance Growth of Main GDP Components for Previous Year NEXT CHAPTER: BALANCESBACK TO CONTENTS

Balances Budget Deficit – Target and Execution Gross Public Debt BACK TO CONTENTS Budget Deficit and General Government Expenditure Gross Tax Burden Current Account and Net Foreign Debt

Gross Public Debt (as percentage of GDP) Source: Ministry of Finance Since 2003, gross public debt has been on a consistent downward trend, only interrupted by the extraordinary circumstances surrounding the 2009 global economic crisis CONTINUE

Budget Deficit – Target and Execution (In $ Billion) Source: Ministry of Finance CONTINUE For the first time in its history, Israel enacted a biennial budged for the years In 2009 Israel came in under budget target.

Source: Ministry of Finance Budget Deficit and General Government Expenditure Budget Deficit (% of GDP) General Government Expenditure (% of GDP) CONTINUE

Current Account Balance and Net Foreign Debt Source: Ministry of Finance. In 2003, the current account balance turned positive accompanied by an decrease of net foreign debt Current Account Surplus (% of GDP) Net Foreign Debt (% of GDP) CONTINUE

Source: Ministry of Finance, OECD Gross Tax Burden (as % of GDP) OECD countries average: 35.8% (2007 average) OECD countries average: 35.2% (2008 average estimated by OECD) NEXT CHAPTER: INTERNATIONAL COMPARISONSBACK TO CONTENTS

International Comparisons NASDAQ and Tel-Aviv 100 (monthly average) Global Competitive Index Central Bank Interest Rates: Israel and U.S.A BACK TO CONTENTS

Central Bank Interest Rates: Israel and U.S.A Source: Bank of Israel (BOI), Federal Reserve Bank of Israel Rate (BOI) U.S. Federal Funds Rate CONTINUE The Bank of Israel was the first in the western world to raise interest since the outburst of the economic crisis. The rate was raised gradually from 0.5% to 1.25%

NASDAQ & Tel Aviv 100 (monthly average) Source: Ministry of Finance Tel Aviv 100 corresponds with the NASDAQ to current events CONTINUE

Source: World Economic Forum, Global Competitiveness Index, Global Competitiveness Index The World Economic Forum Ranked Israel 27 th Out of 134 Countries CONTINUE

Global Competitiveness Index 2009/10 (selected categories, rank circled in red) Source: World Economic Forum, Global Competitiveness Index, CONTINUE Utility PatentsQuality of Scientific Research Institutions Strength of Investor ProtectionCompany spending on R&D

Source: World Economic Forum, Global Competitiveness Index, Global Competitiveness Index 2009/10 (selected categories, rank circled in red) Capacity for InnovationAvailability of Latest Technologies Venture Capital AvailabilityPersonal Computers NEXT CHAPTER: ISRAEL AND THE OECDBACK TO CONTENTS

Israel and the OECD Unemployment Rate in GDP Based on PPP per Capita in 2006 BACK TO CONTENTS

Unemployment Rate (harmonized) Source: Ministry of Finance, OECD CONTINUE 2008: Israel stood at the total OECD average 2009: Israel stood below the total OECD average During 2009, with the global economic crisis in the background, Israels unemployment grew mildly compared with some OECD members.

GDP per capita based on Purchasing-Power-Parity (PPP), 2008, current prices in US$ Source: Ministry of Finance, OECD NEXT CHAPTER: INTERNATIONAL TREATIESBACK TO CONTENTS * Estimated

International treaties Avoidance of Double Taxation Agreements Protection of Investments Agreements Cooperation in Industrial R&D Agreements International Organization Memberships Israels Free Trade Agreements BACK TO CONTENTS

QIZ Agreements Egypt(2004) Jordan(1998) Israels Free Trade Agreements USA EFTA Turkey Canada Mexico European Union (Association Agreement) MERCOSUR (Argentina, Brazil, Paraguay & Uruguay, not yet in force) CONTINUE Source: Ministry of Finance

Avoidance of Double Taxation Agreements Austria Belarus Belgium Brazil Bulgaria Canada China Czech Republic Croatia Denmark Estonia Ethiopia Finland France Germany Greece Hungary India Ireland Italy Jamaica Japan Latvia Lithuania CONTINUE Source: Ministry of Finance

Avoidance of Double Taxation Agreements CONTINUE Source: Ministry of Finance Luxembourg Mexico Moldova Norway Philippines Portugal Poland Romania Russia Singapore Slovakia Slovenia South Africa South Korea Spain Sweden Switzerland Thailand Netherlands Turkey Ukraine United kingdom Uzbekistan U.S.A VietnamTaiwan

Cooperation in Industrial R&D Agreements CONTINUE Austria Belgium Canada China Finland France Germany Hong Kong Sweden United kingdom U.S.A India Ireland Italy Korea Netherlands Portugal Singapore Spain Source: Ministry of Finance

Protection of Investment Agreements CONTINUE Albania Argentina Armenia Azerbaijan Belarus Bulgaria China Croatia India Kazakhstan Latvia Lithuania Moldova Mongolia Poland RomaniaGermany Cyprus Czech Republic El Salvador Estonia Georgia Guatemala Ethiopia Source: Ministry of Finance

*pending ratification Protection of Investment Agreements CONTINUE South Korea Slovakia Slovenia South Africa * Thailand Turkey Turkmenistan SerbiaUkraine Uruguay Uzbekistan Source: Ministry of Finance

Main International Economic Organizations Membership: Israel is a member in leading Israel is a member in leading international : economic organizations: WBGWBG IMFIMF WTOWTO OECD (candidate)OECD (candidate) A more detailed list: BIS | BSEC (observer) | CE (observer) | CERN (observer) | EBRD | FAO | IADB | IAEA | WBG – IBRD, IFC, IDA, MIGA | ICAO | ICC | ICCT (signatory) | ICFTU | IFAD | IFRCS (observer) | ILO | IMF | IMO | Interpol | IOC | IOM | ISO | ITU | OAS (observer) | OECD (candidate) | OPCW (signatory) OSCE (partner) | PCA | UN | UNCTAD | UNECE | UNEP | UNESCO | UNHCR | UNIDO | UPU | WCO | WFP | WHO | WIPO | WMO | WTOO | WTRO | WTO | ICSID NEXT CHAPTER: RELEVANT SITESBACK TO CONTENTS Source: Ministry of Finance

Relevant Sites BACK TO CONTENTS Ministry of Finance International Affairs Website Ministry of Finance Israeli Government Institutions OECD Profile on Israel Bank of Israel (BOI) Central Bureau of Statistics Israeli Government Portal Israel Securities Authority Ministry of Industry, Trade and Labor CONTACT US

WE WELCOME YOUR FEEDBACK Mr. Roni Hershkovitz Director Overseas Economic Information International Affairs Department Ministry of Finance Jerusalem Israel Mr. Assaf Luxembourg Overseas Economic Information International Affairs Department Ministry of Finance Jerusalem Israel START OVER VISIT OUR WEBSITE: CONTACT US: