1. STATE OF ISRAEL MINISTRY OF FINANCE INTERNATIONAL AFFAIRS DEPARTMENT ECONOMIC HIGHLIGHTS 4 th Quarter 2009

2. 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

3. 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

4. *Using public exchange rate. ** In current prices Main Economic Indicators 2009 Q3 2009 Q2 2009 Q1 2008 Q4 20082007Criteria 46.045.845.746.0183.8176.7 GDP (current prices in $B)* 2.2%1.0%-3.2%-1.6%4.0%5.2% Real GDP Growth Rate (%) -- $28,473$27,395 GDP per Capita (PPP adjusted)** -- 2.1%5.3% GDP per Capita Growth Rate (%, 2005 prices) 19.0 (41.4%) 18.1 (39.5%) 17.5 (38.3%) 19.0 (41.3%) 82.9 (45.1%) 78.8 (44.5%) Exports (Goods & Services)** $B* (As Percentage of GDP) 18.9 (41.1%) 16.7 (36.6%) 16.5 (36.2%) 18.3 (40.8%) 80.9 (44.0%) 79.0 (44.7%) Imports (Goods & Services)** $B* (As Percentage of GDP) 7.8%8.0%7.6%6.5%6.1%7.3% Unemployment Rate (%) CONTINUE Source: Ministry of Finance, IMF

5. Source: Ministry of Finance 2008200720062005Criteria 77.1%78.3%84.5%93.8%Total Gross Debt (Percentage of GDP) 42.9%44.0%44.8%45.5% Government Expenditure (Percentage of GDP) 1.0%2.8%5.0%3.1%Current Account Surplus (% of GDP) 3.7%3.3%0.0%2.3%Inflation Rate (CPI, end of year) CONTINUE Main Economic Indicators

6. 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

7. GDP and Business GDP (Annual rate of change (%), in Constant Prices) Q3 Continues the recovery that began in Q2. In the past few years, Israel’s economy has enjoyed high growth rates. Source: Ministry of Finance. CONTINUE

8. 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

9. Major GDP Components (Annual rate of change (%), in constant prices) Source: Ministry of Finance CONTINUE

10. Exports of Goods and Services ($B) CONTINUE

11. 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

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

13. Unemployment and Participation (As % of Total Labor Force) 2009 Q3 shows a 0.2% decrease in unemployment Source: Ministry of Finance CONTINUE

14. 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 2008. * July 2009 index compared to July 2008 * CONTINUE

15. Inflation Rate Worldwide (Annual rate of change in CPI, end of 2008) Sources: Ministry of Finance, OECD CONTINUE

16. 2008Criteria + 4.0%Real GDP + 4.4%Business GDP + 3.0%Exports + 3.6%Private Consumption + 2.8%Public Consumption + 5.1%Investment in Fixed Assets Source: Ministry of Finance Growth of Main GDP Components for Previous Year NEXT CHAPTER: BALANCESBACK TO CONTENTS

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

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

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

20. Current Account Balance and Net Foreign Debt 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

21. Source: Ministry of Finance, OECD Gross Tax Burden (as % of GDP) OECD countries average: 35.8% (2003-2007 as of 2007 average) OECD countries average: 35.2% (2008 average estimated by OECD) NEXT CHAPTER: INTERNATIONAL COMPARISONSBACK TO CONTENTS

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

23. 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 was the first in the western world to raise interest since the economic crisis. The rate was raised from 0.5% to 0.75% in September, and from 0.75% to 1% in December CONTINUE

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

25. Source: World Economic Forum, Global Competitiveness Index, 2009-2010 Global Competitiveness Index 2009-2010 The World Economic Forum Ranked Israel 27 th Out of 134 Countries CONTINUE

26. Global Competitiveness Index 2009/10 (selected categories, rank circled in red) Source: World Economic Forum, Global Competitiveness Index, 2009-2010 CONTINUE Utility PatentsQuality of Scientific Research Institutions Strength of Investor ProtectionCompany spending on R&D

27. Source: World Economic Forum, Global Competitiveness Index, 2009-2010 Global Competitiveness Index 2009/10 (selected categories, rank circled in red) CONTINUE Capacity for InnovationAvailability of Latest Technologies Venture Capital AvailabilityPersonal Computers

28. Israel and the OECD Unemployment Rate in 2007-2008 GDP Based on PPP per Capita in 2006 Real GDP Growth BACK TO CONTENTS

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

30. Unemployment Rate (harmonized) Source: Ministry of Finance, OECD 2008 2007 2008 2007 2008 2007 2008 2007 CONTINUE

31. GDP per capita based on Purchasing-Power-Parity (PPP), 2007, current prices in US$ 26,314 Source: Ministry of Finance, OECD NEXT CHAPTER: INTERNATIONAL TREATIESBACK TO CONTENTS

32. 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

33. QIZ Agreements Egypt Jordan Israel’s Free Trade Agreements 1985 1992 1997 1999 2000 2007 USA EFTA Turkey Canada Mexico European Union (association agreement) MERCOSUR (Member states of the common market of the south, not yet in force) CONTINUE Source: Ministry of Finance

34. 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 Source: Ministry of Finance

35. * 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 Source: Ministry of Finance

36. 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

37. 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

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

39. 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

40. Relevant Sites www.financeisrael.mof.gov.il 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

41. WE WELCOME YOUR FEEDBACK Mr. Roni Hershkovitz Acting 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 www.financeisrael.mof.gov.il VISIT OUR WEBSITE: financeisrael@mof.gov.il CONTACT US: