ECONOMIC HIGHLIGHTS STATE OF ISRAEL MINISTRY OF FINANCE INTERNATIONAL AFFAIRS DEPARTMENT July 3, 2007

Contents: Note: You can return to the beginning of each chapter by clicking the button on the top left side. Economic Figures Balances International Comparisons, additional data and industry Israel and the OECD International Treaties

Israel’s Economy: Export Oriented Growth Rapid Development of Technology & High-Tech Industries Entrepreneurial Culture Supportive Environment for Business Investment and R&D Incentives Main Characteristics

Economic Figures GDP and GDP per Capita Major GDP Components GDP and Exports Growth Exports of Goods and Services Exports of Goods by Region Structure of Industrial Exports Imports of Goods and Services Imports of goods by Region Foreign Investments Unemployment Rate New Employed Persons Inflation Rate Estimations for 2007 Press for desired slide or continue: Back to Contents Main Indicators and Forecast

2007F Criteria 155.9* GDP (current prices in B$) 5.0%5.1%5.2%4.3%1.3%GDP Real Growth rate (%) GDP per Capita (current prices, thousands of $) 3.2% 3.4%3.0%-0.5%GDP per Capita Growth rate (%) 5.9% Exports of Goods & Services (B$) 5.3% Imports of Goods & Services (B$) 7.4%8.4%9.0%10.4%10.7%Unemployment Rate (%) 1.0%-0.1%2.4%1.2%-1.9%Inflation Rate ( CPI, end of year) 4.9%3.3%0.4%0.5%Current Account (% of GDP) Source: Central Bureau of Statistics, Bank of Israel, Ministry of Finance – Economics and Research Department. Using the estimate NIS made by the Ministry of Finance, Multiplied by Bank of Israel ’ s average US$-NIS exchange rate for Predicted Annual % Change by the Ministry of Finance. Main Economic Indicators and forecast Economic Figures 5

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

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

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

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

Exports of Goods by Region (exc. Diamonds) Source: Central Bureau of Statistics, Bank of Israel, Ministry of Finance Q1 Economic Figures 10 Of which: USA: 31.4%

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

Source: Central Bureau of Statistics Imports of Goods and Services (B$) Economic Figures 12

Imports of Goods by Region 2006 (excluding Diamonds) Source: Central Bureau of Statistics, Bank of Israel, Ministry of Finance Economic Figures 13 Of which: USA: 13.4%

Foreign Investments (B$) Source: Ministry of Finance Economic Figures 14

Unemployment Rate by Quarters (Rate of Total Labor Force) Source: Central Bureau of Statistics Economic Figures 15

New Employed Persons in 2006 (Change in Israeli Employed Persons, in Thousands) Source: Ministry of Finance Economic Figures 16

Inflation Rate (Rate of Change in CPI, end of year) Source: Central Bureau of Statistics, Ministry of Finance Economic Figures 17

Estimate for 2007Criteria +5.0% Real GDP +5.7% Business GDP +5.9% Exports +5.1% Private Consumption +2.9% Government Consumption +8.0% Investment in Fixed Assets Source: Ministry of Finance Estimated Growth of Main GDP Components 2007 Economic Figures 18

Balances Budget Deficit Current Account Net Foreign Debt General Government Expenditure Gross Public Debt Gross Tax Burden Back to Contents Press for desired slide or continue:

Gross Public Debt (as percentage of GDP) Source: Ministry of Finance Balances 20

Source: Ministry of Finance, April 2007 Budget Deficit (As percentage of GDP) Budget proposal Balances (Expected: 1.5%) 21

Current Account (As percentage of GDP) Source: Bank of Israel Balances 22

Net Foreign Debt (As percentage of GDP) Source: Ministry of Finance Balances 23

Source: Ministry of Finance General Government Expenditure (As percentage of GDP) Balances 24

Source: Ministry of Finance Gross Tax Burden (As percentage of GDP) Balances 25

International comparisons and additional data ICT and Business Sector’s Product Main Trading Partners Central Bank Interest Rates Nasdaq and Tel Aviv 100 Indices Israel’s Credit Rating Global Competitiveness Index Business Competitiveness Index Network Readiness Index Dividend Distribute in past years Press for desired slide or continue: Back to Contents

Israel’s ICT* and Business Sector’s Product (Annual % change) * Information and Communication Technology Source: Central Bureau of Statistics Additional data 27

Israel’s Main Trading Partners, 2006 ($US Billions) Source: Central Bureau of Statistics Additional data 28

Capital Raised by Israeli VC Funds* (M$) *In vintage year: Year of first closing or first investment. Source: IVC – Israel Venture Capital Research Center Additional data 29

Central Bank Interest Rates Israel vs. U.S.A Source: Bank of Israel, Federal Reserve Bank of Israel Rate Federal Reserve Rate Additional data Currently: 3.5% Currently: 5.25%

Nasdaq Index & Tel Aviv 100 (monthly average) Source: Tel Aviv Stock Exchange (TASE) and the Ministry of Finance. Additional data 31

Source: Credit Rating Agencies, Accountant General Israel’s Credit Rating A1/A+ A2/A A3/A- Baa1/BBB+ Baa2/BBB Baa3 /BBB- Additional data 32

Source: World Economic Forum, Global Competitiveness Index, 2006 Global Competitiveness Index, 2006 Israel Ranks 15 Out of 125 Countries (2005 Rank was 23) Additional data 33

Business Competitiveness Index, 2006 Israel Ranks 19 Out of 121 Countries (2005 Rank was 22) Additional data 34 Source: World Economic Forum, Global Competitiveness Index, 2006

Network Readiness score, 2006 Source: World Economic Forum, Global Information Technology Report (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) Additional data 35

Dividend Distribute in the Past Years (NIS Millions) Source: Tel Aviv Stock Exchange Additional data 36

Israel and the OECD Real GDP growth in 2006 Nominal GDP growth in 2006 Unemployment Rate in 2006 GDP per Capita in 2006 GDP Based on PPP per Capita in 2006 Press for desired slide or continue: Back to Contents

Real GDP Growth in 2006 (Annual percentage of change, Partial list) Source: OECD and the Ministry of Finance, Israel Israel and the OECD 5.1% 3.17% 38

Nominal GDP Growth in 2006 (Annual percent of change, Partial list) Source: OECD and the Ministry of Finance, Israel 5.48% 7.51% Israel and the OECD 39

Unemployment Rate 2006 (average) Source: OECD, and the Central Bureau of Statistics, Israel 6.0% 8.4% Israel and the OECD 40

GDP per capita in 2006 ($US) Source: IMF, Ministry of Finance Countries that have been invited for open discussions for joining the OECD. 19,500 18,610 12,203 8,864 6,856 Israel and the OECD 41

Source: IMF (Estimation) Countries that have been invited for open discussions for joining the OECD. GDP (based on purchasing-power-parity (PPP) ) per capita 2006 ($US) 30,464 23,843 18,215 12,096 12,982 Israel and the OECD 42

International Treaties Israel’s Free Trade Agreements Avoidance of Double Taxation Agreements Cooperation in Industrial R&D Agreements Protection of Investments Agreements International Organization Memberships Press for desired slide or continue: Back to Contents

Israel’s 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) International Treaties { Both Romania and Bulgaria have recently joined the European Union 44

Avoidance of Double Taxation International Treaties France Germany Greece Hungary India Ireland Italy Jamaica Japan Latvia Austria Belarus Belgium Brazil Bulgaria Canada China Czech Republic Denmark Finland Agreements 45

International Treaties South Korea Spain Sweden Switzerland Thailand The Netherlands Turkey Ukraine United Kingdom Uzbekistan USA Lithuania Luxembourg Mexico Norway Philippines Poland Romania Russia Singapore Slovakia South Africa Avoidance of Double Taxation Agreements (con.) 46

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 International Treaties 47

Protection of Investment Agreements International Treaties Albania Argentina Armenia Belarus Bulgaria Croatia Cyprus Czech Republic El-Salvador Estonia Georgia Germany Hungary India Kazakhstan Korea 48

Protection of Investment Agreements (con.) International Treaties Turkmenistan Ukraine Uruguay Uzbekistan QIZ Agreement Egypt Jordan Latvia Lithuania Moldova Poland Romania Slovakia Slovenia Thailand Turkey 49

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 | OECD (candidate) * Economic Organizations International Treaties 50

Relevant Sites Government Institutes: Bank of Israel BOI Annual Report (Complete in English) Central Bureau of Statistics Israeli Government Portal Ministry of Finance Israel Securities Authority Ministry of Industry, Trade and Labor Economic News: “The Marker”The Marker “Globes” Back to Contents

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