ECONOMIC TALKING POINTS STATE OF ISRAEL MINISTRY OF FINANCE INTERNATIONAL AFFAIRS DEPARTMENT May 6 th, 2007

Contents: Economic Figures……. Balances……………... International comparisons and additional data………

Economic Figures

Israels Economy: Main Characteristics Export Oriented Growth Rapid Development of Technology & High-Tech Industries Entrepreneurial Culture Supportive Environment for Business Investment & R&D Incentives 4 Economic Figures

2007F Criteria 148.5* GDP (current prices in B$) 5.0%5.1%5.2%4.3%1.3%GDP Real Growth rate (%) GDP per Capita (current prices, 000$) 3.2% 3.0%-0.5%GDP per Capita Growth rate (%) Exports of Goods & Services (B$) Imports of Goods & Services (B$) 7.4%8.4%9.0%10.4%10.7%Unemployment Rate (%) 1.0%-0.1%2.4%1.2%-1.9%Inflation Rate ( CPI, end of year) 4.9%3.3%0.4%0.5%Current Account (% of GDP) Source: Central Bureau of Statistics, Bank of Israel, Ministry of Finance * Using the NIS estimate by the Ministry of Finance, Multiplied by Bank of Israel s average US$-NIS rate for Main Economic Indicators and forecast 5 Economic Figures

Source: Central Bureau of Statistics, Ministry of Finance GDP and GDP per Capita (Annual % Change, in Constant Prices) 6 Economic Figures

Source: Central Bureau of Statistics, Bank of Israel, Ministry of Finance Major GDP Components (Annual % Change, in Constant Prices) 7 Economic Figures

GDP Growth and Exports Growth (Cumulative Rate of Growth by Period) Source: Central Bureau of Statistics, Bank of Israel, Ministry of Finance 8 Economic Figures

Source: Central Bureau of Statistics Exports of Goods and Services (B$) 9 Economic Figures

Exports of Goods by Region 2006 (exc. Diamonds) Source: Central Bureau of Statistics, Bank of Israel, Ministry of Finance 10 Economic Figures

Structure of Industrial Exports 35% 65% 23% 24% 76% 77% 27% 74% 26% 27% 74% 73% 26% 73% 75% 25% 75% Jan-Mar s.a. at annual rate.* Economic Figures 11

Imports of Goods by Region 2006 (exc. Diamonds) Source: Central Bureau of Statistics, Bank of Israel, Ministry of Finance 12 Economic Figures

Foreign Investments (B$) Source: Ministry of Finance 13 Economic Figures

Unemployment Rate by Quarters* (% of Total Labor Force) Source: CBS 14 Economic Figures

New Employed Persons in 2006 (Change in Israeli Employed Persons, in Thousands) Source: Ministry of Finance 15 Economic Figures

Inflation Rate (% Change in CPI, end of year) Source: CBS, Ministry of Finance 16 Economic Figures

Estimate for 2007Criteria 5.0% Real GDP Growth 5.6% Business GDP Growth 5.1% Exports Growth 4.9% Private Consumption Growth 2.9% Government Consumption Growth 9.5% Investment in Fixed Assets Growth Source: Ministry of Finance Estimated Growth of Main GDP Components Economic Figures

Balances Back to contents

Source: Ministry of Finance, April 2007 Budget Deficit (% of GDP) 19 Budget proposal Balances

Current Account (% of GDP) Source: Bank of Israel 20 Balances

Net Foreign Debt (% of GDP) Source: Ministry of Finance 21 Balances

Source: Ministry of Finance General Government Expenditure (% of GDP) 22 Balances

Source: Ministry of Finance Gross Tax Burden (% of GDP) 23 Balances

International comparisons and additional data Back to contents

Central Bank Interest Rates Israel vs. U.S.A (%) Source: Bank of Israel, Federal Reserve Bank of Israel Rate Federal Reserve Rate 25 Additional data Currently: 3.75% Currently: 5.25%

Nasdaq Index & Tel Aviv 100 (monthly average) Additional data 26

Source: Credit Rating Agencies, Accountant General Israels Credit Rating A1/A+ A2/A A3/A- Baa1/BBB+ Baa2/BBB Baa3 /BBB- 27 Additional data

Source: World Economic Forum, GCI 2006 Global Competitiveness Index, 2006 Israel Ranks 15 Out of 125 Countries (2005 Rank was 23) Additional data

Source: World Economic Forum, GCI 2006 Business Competitiveness Index, 2006 Israel Ranks 19 Out of 121 Countries (2005 Rank was 22) Additional data

Network Readyness score, 2006 Source: World Economic Forum, GCI (1) 5.58 (5) 5.54 (7) 5.45 (9) 5.35 (11) 5.27 (14) 5.22 (16) 5.14 (18) 4.99 (23) 4.48 (28) 4.35 (32) 4.19 (38) 3.98 (48) 3.86 (52) 30 Additional data

Israels Free Trade Agreements USA (1985) EFTA (1992) Jordan (1995): Bilateral Trade Agreement Canada (1997) Turkey (1997) Mexico (1999) Romania (2000) European Union – Association Agreement 2000 Bulgaria (2002) 31 Additional data

Avoidance of Double Taxation Agreements Belarus Belgium Brazil Bulgaria Canada China Czech republic Denmark Finland France Germany Greece Hungary India Jamaica Japan Luxembourg Mexico Norway Philippines Poland Romania Russia Singapore Slovakia South Africa South Korea Spain Sweden Thailand The Netherlands Turkey USA 32 Additional data Also: Austria, Ireland, Italy, Latvia, Lithuania, Switzerland, Ukraine, United Kingdom, and Uzbekistan.

Cooperation in Industrial R&D Agreements Belgium Canada China France Hong Kong Italy Netherlands Portugal Spain UK USA Singapore Ireland Sweden Finland Germany IndiaAustria Korea 33 Additional data

Protection of Investment Agreements Albania Argentina Armenia Belarus Bulgaria Croatia Cyprus Czech Republic El-Salvador Estonia Georgia Germany Hungary India Kazakhstan Korea 34 Additional data

Protection of Investment Agreements (con) Turkmenistan Ukraine Uruguay Uzbekistan QIZ Agreement Egypt Jordan Latvia Lithuania Moldova Poland Romania Slovakia Slovenia Thailand Turkey 35 Additional data

International Organization* Memberships: BIS | BSEC (observer) | CE (observer) CERN (observer) | EBRD | FAO | IADB | IAEA IBRD | ICAO | ICC | ICCt (signatory) | ICFTU IDA | IFAD | IFC | IFRCS (observer) | ILO | IMF IMO | Interpol | IOC | IOM | ISO | ITU | OAS (observer) OPCW (signatory) | OSCE (partner) | PCA | UN UNCTAD | UNECE | UNEP | UNESCO | UNHCR UNIDO | UPU | WB | WCO | WFP | WHO | WIPO | WMO WToO | WTrO | WTO | MIGA * Economic Organizations 36 Additional data

Relevant Sites Government Institutes: Bank of Israel Central Bureau of Statistics Israeli Government Portal Ministry of Finance Israel Securities Authority Economic News: The Marker Globes 32

We welcome your feedback: Contact: Uri Geva International Affairs Department Ministry of Finance, Jerusalem, Israel