Israel Economy Facts

by ebizdir · Published January 30, 2023 · Updated February 22, 2023

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.

Countryaah.com: Major imports by Israel, covering a full list of top products imported by the country and trade value for each product category.

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.

Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including ISR which represents the country of Israel. Check findjobdescriptions to learn more about Israel.

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.