Economical overview
Israel has gone from agricultural wonder to
IT paradise. High-tech products and services have
increased the world's interest in exchanging with
Israel. Government control of the economy has had to
give way to private initiatives. At the same time,
agriculture is about to be transferred from collective
to individual ownership.
The Jews who emigrated from Europe and came to
characterize the modern state of Israel from 1948 were
largely left-wing people. In addition, self-sufficiency
in basic commodities was an important goal in the
absence of peace with neighboring countries. Collective
agriculture - kibbutz and moss garden
- became cornerstones of the economy. The first
collective farms were founded as early as the 20th
century, before independence.
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The kibbutz people have lived by the principle that
all assets are shared equally. At moss gardens, the
residents can also have their own lot to grow. Now there
is a rapid change. In 2018, less than a quarter of the
collective farms were run in the old way. A steady
privatization is underway, different far-reaching places
in different places. Two thirds of the kibbutzim now
have market wages.
The largest food producer, Tnuva (Tenuvah), which was
started by the kibbutz and moss sea movements, has even
been bought by state-owned Chinese Bright Food Group. It
is remarkable in a country where self-sufficiency has
been of great importance. Sales to China also aroused
opposition in the Israeli parliament, despite the fact
that the majority of the Chinese took over 2014 had been
sold to a British company as early as 2007. Israel's
trade relations are also increasing with other economic
powers such as India.
The proportion of the population living on
agriculture has decreased. Today, the high-tech
industry, often designed for the needs of the armed
forces, drives the economy and has taken over as an
export success. Biotechnology, especially
pharmaceuticals, is also a success area, as are cut
diamonds and gemstones. Natural gas has sailed up as a
future industry after gas discoveries in the eastern
Mediterranean.
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As the exchange between companies in different
countries has grown dramatically, globalization has
contributed to strengthening Israel's private business
and the collective operations to lose ground.
An international IT bubble with overvalued technology
companies burst around 2000. It also had effects in
Israel. By contrast, Israel managed relatively well
through the international financial crisis 2008-2009.
Israel maintained some growth while many other countries
saw their gross domestic product (GDP) shrink. Since
2000, the Israeli economy has grown by an average of 3.3
percent each year, according to the Economic Cooperation
Organization's OECD compilation 2018.
Pilgrimage and sun vacations attract visitors from
abroad. In 2018, the Ministry of Tourism reported record
figures: 2.1 million tourists arrived during the first
half of the year. It was the first time the two million
dash was crossed in a six-month period. The biggest sun
holiday destinations are Eilat on the Red Sea and
Netanya on the Mediterranean. A large part of the
pilgrimage goals - for example the Church of the
Nativity in Bethlehem and the Church of the Holy
Sepulcher in Jerusalem - lie on land occupied by the
dominant view of the outside world. In the visitor
statistics, the political conditions are reflected. Not
so that people object to the occupation by refraining
from travel, however, travelers avoid pilgrimage and
other places, especially on the West Bank during times
of political unrest when the visits are deemed
dangerous.
The coast towards the Mediterranean facilitates ship
and air traffic. However, conflicts with neighboring
countries have restricted international road and rail
connections. Large ports are located in Haifa, Ashdod
and Eilat. The lion's share of passenger traffic abroad
is via Ben Gurion Airport. The charter destination Eilat
at the Red Sea was given a new airport in 2019. The
airport is controversial: it is close to the border with
Jordan, which has emphasized to the civil aviation
cooperation agency ICAO that the flights could cause
violations of the Jordanian airspace.
The extension of the Tel Aviv-Jerusalem express train
line is also contested because of tunnel plans under
Jerusalem's old city center (see Calendar). Between
cities you can travel by bus or by sherut,
public taxi. For those who are going the
longest, there may be several stops along the way, and
some detours. The bus company Egged, which operates
throughout the country, avoids Arab communities, which
means that they are largely lacking public transport.
Palestinians in areas that occupy Israel are subject
to completely different conditions than the population
of Israel. On the West Bank there are roads built for
the Jewish settlements and for the needs of the Israeli
army. Palestinians are not allowed to travel on those
roads. Furthermore, when Palestinians want to travel
between the occupied territories, they must seek
permission from an Israeli border authority, Cogat,
which is under the Ministry of Defense and has been
criticized for applying unclear rules. It is also
difficult for Palestinians from the West Bank to obtain
permission to fly abroad via Israeli airports - instead,
they are allowed to make part of the journey by road,
via Jordan. Palestinian shipping, despite the Gaza
Strip's coast to the Mediterranean, is hindered by
Israel controlling the sea area outside.
Trade on favorable terms
War with neighboring countries and spending on
receiving waves of Jews who immigrated from other
countries have put financial strain on Israel. The
involvement of Jews abroad has been of great importance
over the years, including financially. The United States
is the single most important country in the world, with
favorable trade conditions and extensive military
support. In the large US pharmaceutical market, Israel
is the fourth largest country of origin.
The export of defense equipment goes not only to
major powers like the US and the UK, but also to more
contested regimes. Large contracts for the international
defense industry often include development cooperation
and counter-purchase deals. For example, Israel and
Azerbaijan - a country in the Caucasus with Sunni Muslim
population and authoritarian rule - are developing
drones together. Thailand has purchased Israeli-made
drones. Sweden has, among other things, purchased
equipment for the fighter jet Jas 39 Gripen by Israeli
manufacturers. India buys military equipment for nearly
a billion dollars each year.
A trade agreement with the EU allows Israeli exports
to the EU countries against no or very low tariffs. The
agreement does not apply to areas occupied by Israel.
The EU requires products from settlements on occupied
land to be labeled in origin, so that they cannot be
covered by the favorable rules that Israel enjoys
otherwise.
Israel was the first country outside Latin America to
enter into trade agreements with Mercosur countries.
FACTS - FINANCE
GDP per person
US $ 41,614 (2018)
Total GDP
US $ 369,690 M (2018)
GDP growth
3.3 percent (2018)
Agriculture's share of GDP
1.2 percent (2017)
Manufacturing industry's share of GDP
12.4 percent (2017)
The service sector's share of GDP
69.4 percent (2017)
Inflation
1.0 percent (2019)
Government debt's share of GDP
60.8 percent (2018)
Currency
shekel
Merchandise exports
US $ 59,477 million (2018)
Imports
US $ 77,343 million (2018)
Current account
US $ 9,671 million (2018)
Commodity trade's share of GDP
39 percent (2018)
Main export goods
industrial goods, refined diamonds, flowers, citrus
fruits, other fruits, vegetables, peanuts, cotton,
weapons
Largest trading partner
USA, EU countries, China, India
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