STATE OF ISRAEL MINISTRY OF FINANCE INTERNATIONAL AFFAIRS DEPARTMENT ECONOMIC HIGHLIGHTS 3rd Quarter 2009

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 public exchange rate. ** In current prices Main Economic Indicators 2009 Q Q Q Q Criteria GDP (current prices in $B)* 1.0%-3.2%-1.4%0.9%4.0%5.2% GDP Real Growth Rate (%) -- $24,920$24,576 GDP per Capita (PPP adjusted)** %5.3% GDP per Capita Growth Rate (%, 2005 prices) 17.7 (38.8%) 17.5 (38.4%) 19.0 (41.2%) 21.2 (46.0%) 80.5 (44.5%) 78.1 (44.2%) Exports (Goods & Services)** $B* (As Percentage of GDP) 16.1 (35.2%) 16.4 (35.9%) 18.7 (40.7%) 20.2 (43.7%) 80.7 (44.3%) 79.2 (44.8%) Imports (Goods & Services)** $B* (As Percentage of GDP) 8.0%7.6%6.5%6.0%6.1%7.3% Unemployment Rate (%) CONTINUE

Source: Ministry of Finance Criteria 78.3%79.8%85.5%94.3%Total Gross Debt (Percentage of GDP) 43.4%44.2%45.0%45.5% Government Expenditure (Percentage of GDP) 1.1%2.8%5.1%3.2%Current Account Surplus (% of GDP) 3.8%3.4%-0.1%2.4%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 CONTINUE Main Economic Indicators Moody's / S&P & Fitch Aa3/AA- A1/A+ A2/A A3/A- Baa1/BBB+ Baa2/BBB Baa3/BBB-

GDP and Business GDP (Annual rate of change (%), in Constant Prices) Despite the current economic crisis, 2009 Q2 shows signs of recovery. In the past few years, Israel’s economy has enjoyed high growth rates. 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, Israel’s 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

Exports of Goods and Services ($B) CONTINUE

Israel’s Main Trading Partners (US$ Billions, excluding diamonds) Source: Central Bureau of Statistics 2008 EXPORT IMPORT 2007 China is becoming a leading trade partner for Israel CONTINUE

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

Unemployment and Participation (As % of Total Labor Force) August 2009 shows signs of decrease in unemployment for the fist time since May The 1% downtrend measured will have a positive effect on Q3 unemployment rate, containing the global crisis’s effect on the Israeli economy. Source: Ministry of Finance CONTINUE

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 3.8% during * July 2009 index compared to July 2008 * CONTINUE

Inflation Rate Worldwide (Rate of Change in CPI, end of 2008) Inflationary pressures in Israel have decreased, as a result of the world crisis. 3.8% Sources: Central Bureau of Statistics, OECD CONTINUE

2008Criteria + 4.0%Real GDP + 4.4%Business GDP + 3.0%Exports + 3.9%Private Consumption + 2.8%Public Consumption + 5.1%Investment in Fixed Assets Source: Ministry of Finance Growth of Main GDP Components 2008 NEXT CHAPTER: BALANCESBACK TO CONTENTS

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

Gross Public Debt (as percentage of GDP) Source: Ministry of Finance Since 2003, the gross public debt has been on a downward trend. CONTINUE

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

Current Account Balance and Net Foreign Debt * As percentage of 2007 GDP Source: Ministry of Finance. In 2003, current account turned positive, conversely with the decrease of the 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) Tax burden has been in the vicinity of OECD average since 2003 OECD countries average: 26.4% (as of 2008) 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 The Bank of Israel announced that the interest rate for September 2009 will increase by 0.25% to a level of 0.75%, being the first in the western world to raise interest since the economic crisis. CONTINUE

NASDAQ & Tel Aviv 100 (monthly average) Source: Tel Aviv Stock Exchange (TASE), World Federation of Exchanges (WFE) 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 23 rd Out of 134 Countries CONTINUE

Global Competitiveness Index 2008/9 (selected categories) Venture Capital Availability Source: World Economic Forum, Global Competitiveness Index, Availability of Scientists & Engineers Quality of Scientific Research InstitutionsCompany Spending on R&D CONTINUE

Strength of Investor Protection Source: World Economic Forum; Global Competitiveness Index, Availability of Latest Technologies Utility PatentsLegal Rights Index Global Competitiveness Index 2008/9 (selected categories) CONTINUE

Countries that have been invited for open discussions for joining the OECD *GCI:Provides a holistic overview of factors critical to productivity and competitiveness *NRI: Measures the level of ICT (Information and Communication Technologies) development of nations The Networked Readiness Index 2008–2009 Global Competitiveness Index 2008/9 (selected categories) NEXT CHAPTER: ISRAEL AND THE OECDBACK TO CONTENTS Source: World Economic Forum; Global Competitiveness Index (GCI) , Global Information Technology Report

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

Real GDP Growth (Annual percentage of change, partial list) Source: Ministry of Finance, IMF 07’ 08’ As many OECD countries were highly influenced by the recession in 2008, Israel only experienced a relatively mild decay in growth rate. 2007: 5.3% 2008: 4.0% CONTINUE

Unemployment Rate (harmonized) Source: OECD, Ministry of Finance 08’ 07’ 08’ 07’ 08’ 07’ 08’ 07’ CONTINUE

GDP per capita based on purchasing-power-parity (PPP) 2007, (in US$) 32,752 26,314 Source: OECD NEXT CHAPTER: INTERNATIONAL TREATIESBACK TO CONTENTS

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

QIZ Agreements Egypt Jordan Israel’s Free Trade Agreements USA EFTA Turkey Canada Mexico European Union (association agreement) MERCOSUR (Member states of the common market of the south, not yet in force) CONTINUE

Avoidance of Double Taxation Agreements * The agreement with Estonia has only been signed initially 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

* The agreement with Portugal has been recently ratified ** Not yet ratified by South Africa. Avoidance of Double Taxation Agreements 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 CONTINUE

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

Protection of Investment Agreements Austria Belgium Canada China Finland France Germany Hong Kong Albania Argentina Armenia Azerbaijan Belarus Bulgaria China Croatia Cyprus Czech republic El Salvador Estonia Georgia Germany Guatemala India CONTINUE

*appending ratification Kazakhstan Korea Latvia Lithuania Moldova Poland Romania Slovakia Slovenia Protection of Investment Agreements South Africa * Thailand Turkey Turkmenistan Ukraine Uruguay Uzbekistan CONTINUE

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

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 Acting Director Overseas Economic Information International Affairs Department Ministry of Finance Jerusalem Israel Mr. Assaf Luxembourg International Affairs Department Ministry of Finance Jerusalem Israel START OVER VISIT OUR WEBSITE: CONTACT US: