1. October 25 th, 2015 www.financeisrael.mof.gov.il

2. October 25 th, 2015 Table of Contents 2 3 4 2 5 7 8 6 Foreign Trade and Balance of Payments Labor Market Real Economy Fiscal Stance Innovative Economy Learn More Price Stability and Monetary Policy 1Main Indicators 9Contact

3. October 25 th, 2015 Economic Figures 3 Criteria 201320142014Q22014Q32014Q42015Q12015Q2 GDP (current prices in $B)* 292.6306.178.378.073.671.173.7 Real GDP growth rate (% change ) 3.3%2.6%3.4%0.2%6.1%1.8%0.1% GDP per capita (Current $) 36,31637,2729,5639,4798,8898,5568,827 GDP per capita growth rate (%, constant prices) 1.3%0.6%0.4%1.8%-3.9%0.1%- 1.7%- Exports (goods & services), $B 97.198.724.623.924.523.622.9 (As % of GDP) 33.2%32.3%31.4%30.6%33.4%33.2%31.1% Imports (goods & services), $B 91.993.723.224.522.721.020.6 (As % of GDP) 31.4%30.6%29.6%31.4%30.9%29.5%27.9% Unemployment rate 6.2%5.9%6.1%6.2%5.6%5.4%5.1% * Using a periodic average exchange rate. Source: CBS, IMF

4. October 25 th, 2015 Economic Figures 4 Source: CBS, IMF Criteria20072008200920102011201220132014 Public debt 74.0%72.9%75.1%70.9%68.9%67.9%67.2%66.7% (As % of GDP) General government expenditure 42.2%41.4%41.5%40.4%39.6%40.1%40.4%40.1% (As % of GDP) Current account surplus 4.0%1.4%4.0%3.5%2.6%1.5%2.8%2.9% (As % of GDP) Inflation rate 3.4%3.8%3.9%2.7%2.2%1.6%1.8%-0.2% (CPI, yearly change, %) Budget deficit (Central) 0.0%2.1%4.8%3.4%3.1%3.9%3.1%2.7% (As % of GDP)

5. October 25 th, 2015 Table of Contents 5 3 4 5 7 8 6 Foreign Trade and Balance of Payments Labor Market Fiscal Stance Innovative Economy Learn More Price Stability and Monetary Policy 9Contact 2Real Economy 1Main Indicators

6. October 25 th, 2015 GDP and Business GDP Annual rate of change, constant prices, 2010 6 Source: CBS

7. October 25 th, 2015 GDP Growth Israel compared to advanced economies, annual rate of change, constant prices 7 Source: Euro Area and OECD - OECD database, U.S - OECD database BEA, Israel - CBS Since 2004, Israel’s GDP growth rate has exceeded the average growth rate of advanced economies. In 2009, while most economies experienced a decline in GDP as a result of the global economic crisis, Israel maintained a steady 1.9% growth.

8. October 25 th, 2015 GDP Components Real annual percentage change 8 Effects of the global economic crisis Source: CBS

9. October 25 th, 2015 GDP per Capita $ U.S, Current prices, Current PPP, 2014 (or latest available) 9 Source: OECD

10. October 25 th, 2015 Output Gap As percentage of Potential GDP, 2014 10 The actual - potential GDP Difference. Positive index means that actual output is higher than potential. Source: OECD

11. October 25 th, 2015 Stock Exchange Indices Percentage Change, the change since the beginning of period until the end of period 11 Source: TASE, Bloomberg

12. October 25 th, 2015 Table of Contents 12 4 2 5 7 8 6 Labor Market Real Economy Fiscal Stance Innovative Economy Learn More Price Stability and Monetary Policy 9Contact 1Main Indicators 3Foreign Trade and Balance of Payments

13. October 25 th, 2015 Exports of Goods and Services As % of GDP 13 Effects of the global economic crisis Source: CBS

14. October 25 th, 2015 Main Export of Goods Destinations As a share of total exports of goods 14 Source: CBS

15. October 25 th, 2015 Main Trading Partners $ US Billions, 2014 15 * The data on trade with Hong-Kong is added to the data regarding China ** The data on trade with Luxemburg is added to the data regarding Belgium Source: CBS

16. October 25 th, 2015 Current Account Surplus As % of GDP 16 Source: CBS

17. October 25 th, 2015 Foreign Investments $ US Billions 17 * In 2006, a large acquisition by Teva Pharmaceutical Industries Ltd. was included in the data. Source: CBS

18. October 25 th, 2015 Exchange Rates 18 The change in the specified currency relative to the US $., the figures are calculated for the beginning and the end of the specified period. An increase means a depreciation of the specified currency relative to the US$. Source: Pacific Exchange Rate Service

19. October 25 th, 2015 Real effective exchange rate of the NIS January 1990 = 100 19 Source: BIS

20. October 25 th, 2015 Terms of Trade 2005 average = 100 20 Terms of Trade = Export Prices to Import Prices Ratio Source: CBS

21. October 25 th, 2015 Israel’s Free Trade Agreements 21 1985 1992 1997 1999 2000 2007 USA EFTA Turkey Canada Mexico European Union (Association Agreement) MERCOSUR QIZ Agreements 2004 1998 Egypt Jordan * Yet to be ratified ** Under negotiations More comprehensive information is available on the Israel Ministry of Finance websiteIsrael Ministry of Finance website Colombia*2013 India**2014

22. October 25 th, 2015 Bilateral Investment Treaties 22 Albania Argentina Armenia Azerbaijan Belarus Bulgaria China Croatia India Kazakhstan Latvia Lithuania Germany Cyprus Czech Republic El Salvador Estonia Georgia Guatemala Ethiopia Hungary* South Korea Moldova * Treaty terminated on June 26, 2007; existing investments are protected for ten years after termination Comprehensive information is available on the Israel Ministry of Finance websiteIsrael Ministry of Finance website Macedonia

23. October 25 th, 2015 Bilateral Investment Treaties 23 * Yet to be ratified Comprehensive information is available on the Israel Ministry of Finance websiteIsrael Ministry of Finance website South Africa* Slovakia Slovenia Serbia Poland Romania Montenegro Thailand Turkey Turkmenistan Ukraine Uzbekistan Uruguay Myanmar*

24. October 25 th, 2015 Economic Organizations Membership in main international economic organizations 24 Israel is a member of leading international economic organizations: United Nations Organizations United Nations Agencies World Bank Group International Monetary Fund OECD WTO Regional Organizations Inter-Governmental Organizations Pacific Alliance (observer) More comprehensive information is available on the Israel Ministry of Finance websiteIsrael Ministry of Finance website

25. October 25 th, 2015 Table of Contents 25 2 5 7 8 6 Real Economy Fiscal Stance Innovative Economy Learn More Price Stability and Monetary Policy 9Contact 1Main Indicators 3Foreign Trade and Balance of Payments 4Labor Market

26. October 25 th, 2015 Unemployment and Participation As % of total labor force 26 Source: CBS

27. October 25 th, 2015 Unemployment Rate Aged 15 and over, S.A, latest available monthly data 27 Source: OECD

28. October 25 th, 2015 Job Creation Change in the number of employees 28 Effects of the global economic crisis Annual average relative to previous year average. Source: CBS

29. October 25 th, 2015 Employment Rate Aged 15 and over, S.A, 2015 Q3 or latest available quarterly data 29 Source: OECD

30. October 25 th, 2015 Table of Contents 30 2 7 8 6 Real Economy Innovative Economy Learn More Price Stability and Monetary Policy 9Contact 1Main Indicators 3Foreign Trade and Balance of Payments 4Labor Market 5Fiscal Stance

31. October 25 th, 2015 General Government Expenditure As % of GDP 31 Source: CBS

32. October 25 th, 2015 General Government Tax Burden As % of GDP 32 Source: CBS

33. October 25 th, 2015 Central Budget Deficit As % of GDP 33 Source: CBS, MoF

34. October 25 th, 2015 Public Debt As % of GDP 34 Effects of the global economic crisis Source: CBS, MoF

35. October 25 th, 2015 Public Debt As % of GDP, international comparison 35 Source: OECD

36. October 25 th, 2015 Avoidance of Double Taxation 36 More comprehensive information is available on the Israel Ministry of Finance websiteIsrael Ministry of Finance website Austria Belarus Belgium Brazil Bulgaria Canada China Croatia Czech Republic Denmark Estonia Ethiopia Finland France Germany Greece Hungary India Ireland Italy Jamaica Japan Latvia Lithuania Luxembourg Georgia Malta

37. October 25 th, 2015 More comprehensive information is available on the Israel Ministry of Finance websiteIsrael Ministry of Finance website Moldova Norway Philippines Portugal Poland Romania Russia Singapore Slovak Republic Slovenia South Korea Spain Sweden Switzerland Thailand Netherlands Turkey Ukraine UK Uzbekistan USA Taiwan Vietnam Mexico South Africa Panama Avoidance of Double Taxation 37

38. October 25 th, 2015 Table of Contents 38 2 7 8 Real Economy Innovative Economy Learn More 9Contact 1Main Indicators 3Foreign Trade and Balance of Payments 4Labor Market 5Fiscal Stance 6Price Stability and Monetary Policy

39. October 25 th, 2015 Inflation Rate Rate of change in Consumer Price Index 39 Source: CBS, Bank of Israel

40. October 25 th, 2015 Interest Rate 40 Source: Bank of Israel

41. October 25 th, 2015 Central Bank’s Interest Rates International comparison, last available data 41 Source: Specified Countries’ Central Banks

42. October 25 th, 2015 Table of Contents 42 2 8 Real Economy Learn More 9Contact 1Main Indicators 3Foreign Trade and Balance of Payments 4Labor Market 5Fiscal Stance 6Price Stability and Monetary Policy 7Innovative Economy

43. October 25 th, 2015 Industrial Production Average annual growth - 2015 average relative to 2005 average 43 Total industrial production grew by 3.2% Source: CBS

44. October 25 th, 2015 Industrial Export Current U.S. $ Billions, the share of high tech and mid high tech sectors in the Israeli goods exports 44 73.2% 72.5 % 75.3% 75.4 % 76.3% 76.6% 77.4% 80.9% 80.1 % 79.5% 80.5% 81.4 % 80.3% * For the first eight months of 2015 annualized Source: CBS

45. October 25 th, 2015 Israel is a World Leader in Science, Technology and Innovation 45 Source: Bloomberg. International Institute for Management Development (IMD) Global Competitiveness Yearbook 2014. World Economic Forum (WEF) Global Competitiveness Report 2014-2015. Bloomberg Global Innovation Index, 2015 (R&D) WEF, Capacity for innovation, 2013-2014 IMD, Business expenditure on R&D, 2012

46. October 25 th, 2015 The Institute for Management Development ranked Israel 24 th out of 60 countries for 2014.  1 st in cyber security*  1 st for innovative capacity  1 st in business expenditure on R&D (%)  2 nd in scientific research  2 nd in public expenditure on education  2 nd for entrepreneurship of managers is widespread in business  3 rd in qualified engineers available in labor market  6 th for Nobel Prizes per capita in the fields of physics, chemistry, physiology, medicine and economics since 1950 Israel in IMD Rankings IMD World Competitiveness Yearbook 2014 46 Source: IMD World Competitiveness Yearbook 2014

47. October 25 th, 2015 The World Economic Forum ranked Israel 27 th out of 148 countries for 2014- 2015 in terms of competitiveness.  3 rd in Innovation  3 rd in Quality of scientific research institutions  5 th in Firm-level technology absorption  6 th in Strength of investor protection  7 th in Company spending on R&D  8 th in Nature of competitive advantage  9 th in Venture Capital Availability Source: World Economic Forum Global Competitiveness Index 2014-2015 Israel in WEF Rankings World Economic Forum Global Competitiveness Index 2013-2014 47 Global Competitiveness Report 2014-2015 “The country’s main strengths remain its world-class capacity for innovation (3rd), which rests on innovative businesses that benefit from the presence of some of the world’s best research institutions (3rd), support by the government through public procurement policies (9th), and a favorable financial environment for start-ups (availability of venture capital is assessed at 9th place).”

48. October 25 th, 2015 Cooperation in Industrial R&D 48 North America New York Massachusetts Maryland Virginia Wisconsin Colorado Illinois Oregon BIRD (Foundation) Ontario CIIRDF (Foundation) South America Argentina Uruguay Brazil Australia (Victoria) Europe France Russia Italy (and Trento county) Germany Greece Czech Republic Bulgaria Lithuania Slovenia Denmark Hungary Turkey Portugal Finland Sweden Ireland Spain Cyprus Netherlands * Through EUREKA (40 country Multilateral Initiative) Asia China (Shanghai, Jiangsu, Shenzhen, Federal) India SIIRD-Singapore (Foundation) KORIL-RDF-Korea (Foundation)

49. October 25 th, 2015 Table of Contents 49 2Real Economy 9Contact 1Main Indicators 3Foreign Trade and Balance of Payments 4Labor Market 5Fiscal Stance 6Price Stability and Monetary Policy 7 8 Innovative Economy Learn More

50. October 25 th, 2015 Learn More 50 Visit the Israel Ministry of Finance English website for more information: Economic Overview of Israel Other publications and reports on the Israeli economy Ministry of Finance publications and reports About the Ministry Ministry press releases

51. October 25 th, 2015 Learn More 51 Bank of Israel Ministry of Foreign Affairs Ministry of Economy Israel Central Bureau of Statistics Israel Government Portal Click to open:

52. October 25 th, 2015 Table of Contents 52 2Real Economy 1Main Indicators 3Foreign Trade and Balance of Payments 4Labor Market 5Fiscal Stance 6Price Stability and Monetary Policy 7Innovative Economy 8Learn More 9Contact

53. October 25 th, 2015Contact 53 Mr. Oded Keneresh, CPA Mr. Naor Porat Dr. Amichai Fishler Overseas Economic Information Chief Economist Department Ministry of Finance State of Israel Send us an email: odedk@mof.gov.il naorp@mof.gov.il amichai@mof.gov.il Visit our WebsiteWebsite Follow us on TwitterTwitter Follow us on LinkedinLinkedin Follow us on YouTubeYouTube Follow us on FlickrFlickr Subscribe to our RSS FeedsRSS Feeds Subscribe to our NewslettersNewsletters