S.R LUTHRA INSTITUTE OF MANAGEMENT MANAGERIAL ECONOMICS ASSESSMENT 3 TOPIC:- ECONOMY OF ISRAEL SUBMITTED BY (GROUP 13) NAME ROLL.NO DALAL RAJ 16 MANJRAWALA DHRUV 21 MODI FEYASH 28 JOTANIYA ANKIT 51 KOSHTI KUNAL 66 SUBMITTED TO: - MR. PARESH DAVE SUBMISSION DATE: - 15TH NOVEMBER 2022 Page | 1 ❖ About Israel : - Under the British Mandate (1920–1948), the whole region was known as 'Palestine', Upon independence in 14 May, 1948, the country formally adopted the name 'State of Israel' - Israel is bordered by Egypt, Jordan, Lebanon, Syria, and the Palestinian territories (West Bank and the Gaza Strip;) it shares maritime borders with Cyprus. - With an area of 22,072 km², the country is slightly larger than half the size of Denmark, or somewhat larger than the US state of New Jersey. ❖ Demographic : - As of 31 August 2021, Israel's population was an estimated 9,393,500. - About 92% of Israelis live in urban areas. - Data published by the OECD in 2016 estimated the average life expectancy of Israelis at 82.5 years, making it the 6th-highest in the world. - Spoken languages are Hebrew and Arabic. ❖ Major Urban Areas : - Designated capital is Jerusalem, the country's largest and most populous city. However, Israel's sovereignty over Jerusalem is internationally disputed. The country's second largest city is Tel Aviv; it is Israel's economic capital; the city is Page | 2 host to almost all foreign diplomatic missions, embassies, and consulates in the country. ❖ Governments & Politics : - Israel is a parliamentary democracy, The prime minister is the head of government and head of the cabinet. ❖ Education : - Israel has a school life expectancy of 16 years and a literacy rate of 97.8%. - Education is compulsory in Israel for children between the ages of 3 and 18. - Israel has 9 public universities that are subsidized by the state and 49 private colleges. - In 2012, the country ranked third in the world in the number of academic degrees per capita (20 percent of the population). Page | 3 ❖ Administrative Map of Israel : Page | 4 ❖ GDP & Economic Wellbeing : Israel GDP - Historical Data Year GDP ($) Per Capita ($) Growth (%) 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 481.59 B 407.10 B 397.93 B 373.64 B 355.28 B 319.02 B 300.08 B 310.94 B 294.17 B 258.42 B 262.29 B 51,430 44,178 43,951 42,063 40,774 37,330 35,808 37,848 36,499 32,668 33,776 8.19 -2.15 3.77 3.98 4.38 4.46 2.28 4.12 4.78 2.82 5.54 - The essential economic performance of a country is reflected by the gross domestic product. So the total of all goods and services sold. - GDP in Israel, on the other hand, reached USD 51,430 per capita, or 481.59 billion USD in the whole country. - Israel is therefore currently ranked 28 of the major economies. If this is calculated per inhabitant taking into account the purchasing power parity, then Israel is in the list of the world's richest countries in place 31. ❖ GDP by Sector : Service 70.6% Industry 26.9% Agriculture 2.4% Page | 5 ❖ Economic Performance : - Israel ranked 7th in the Bloomberg Innovation Index in 2021. The index is calculated annually and most recently included 60 countries. The front-runner was South Korea. - 10 of the 2000 largest listed companies in the world originate from Israel. This is determined annually in the Forbes Global 2000 list. - The 10 largest companies in the country were in 2021: - Rank 936: Teva Pharmaceutical (Petach Tikva) - Rank 948: Bank Hapoalim (Tel Aviv) - Rank 968: Bank Leumi (Tel Aviv) - Rank 1281: Mizrahi Tefahot Bank (Ramat Gan) - Rank 1402: Check Point Software (Tel Aviv) - Rank 1554: Migdal Insurance (Petach Tikva) - Rank 1689: Israel Discount Bank (Tel Aviv) - Rank 1903: Harel Insurance Investments & Financial Services (Ramat Gan) - Rank 1929: FIBI Holdings (Tel Aviv) - Rank 1975: Clal Insurance Enterprises (Tel Aviv) ❖ GNP : Israel GNP - Historical Data Year GNP ($) Per Capita ($) Growth (%) 2021 2020 2019 2018 2017 2016 2015 2014 2013 464.12 B 392.68 B 394.23 B 367.07 B 330.82 B 312.32 B 303.32 B 298.21 B 279.43 B 49,560 42,610 43,540 41,320 37,970 36,540 36,200 36,300 34,670 5.61 -2.61 3.26 4.44 4.81 4.40 2.00 5.59 5.33 Page | 6 - GNP) is the sum of value added by all resident producers plus any product taxes (less subsidies) not included in the valuation of output plus net receipts of primary income (compensation of employees and property income) from abroad. - Over the past decade Israel’s GNP increased with the average growth of 3.65%. - After pandemic in 2020 Israel post its highest ever GNP growth rate of 5.61% in 2021, which shows countries economic boom. ❖ INFLATION : Year 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 Inflation Rate (%) 1.49 -0.59 0.84 0.82 0.25 0.55 -0.63 0.49 1.58 1.69 3.48 - Inflation as measured by the consumer price index reflects the annual percentage change in the cost to the average consumer of acquiring a basket of goods and services that may be fixed or changed at specified intervals, such as yearly. - In Israel, after 2011 this year inflation rate came down to 1.49% from 3.48%. - Here we can conclude that Central Bank of Israel did well to control inflation over the years using monetary policy. - Some how after pandemic Israel’s inflation (CPI) breached 9 years high. Which is may be due to rising crude price and Russia Ukraine war effect. Page | 7 ❖ Israel’s Manufacturing Output : Year Billions of US $ % of GDP 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 46.10 B 44.91 B 42.92 B 40.28 B 37.68 B 38.11 B 38.95 B 37.46 B 35.96 B 35.79 B 11.32 11.29 11.49 11.34 11.81 12.70 12.53 12.73 13.91 13.64 - Manufacturing refers to industries belonging to ISIC divisions 15-37. Value added is the net output of a sector after adding up all outputs and subtracting intermediate inputs. - Israel’s Manufacturing output as % of GDP continuously decreasing since 2011. IT came down to 11.32% from 13.64% in 2011. But total value of manufacturing output in Billions of US $ reached to all time high IN 2020. ❖ Standard of Living in Israel : - Israel's standard of living is significantly higher than all of the other countries in the region and equal to West European countries, and is comparable to that of other highly developed countries. - Israel was ranked 19th on the 2016 UN Human Development Index, indicating "very high" development. It is considered a high-income country by the World Bank. - Israel also has a very high life expectancy at birth. - Israel’s income disparity was a contributing factor to the reported 1.8 million people that were living in poverty in the country in 2016. - Israel ranked at the bottom in terms of women participation in higher education with only 28 percent. Page | 8 ❖ The Great Innovation : - Like many Middle Eastern countries, Israel does not have a lot of fresh water sources. There is a lack of water in the country that has led to many innovative techniques for water conservation such as agricultural modernization, drip irrigation and the formation of a large desalination facility. - The plant uses reverse osmosis to convert sea water to fresh water and is responsible for 40 percent of Israel’s drinking water. - Israel’s innovation in clean water is paving the way for to be a leader in future water exports. - Country’s R&D sector is very strong, with international cooperation a particular focus. - Israel has led the world in research and development (R&D) investment, spending more on R&D as a share of GDP than any other developed country. ❖ Israel Government’s Economic Policies : - With its long-term trend of stable growth, Israel receives comparatively high rankings (rank 8) in the area of economic policies. - The pandemic led to a sharp decline in economic growth in mid-2020, followed by a quick recovery and modest growth rates thereafter. Deficits rose to 5.5% of GDP in 2020 and 4.6% in 2021. Initially limited financial assistance sharply increased the rate of business failure. Relief ultimately included extended unemployment benefits, household cash benefits and employee retention grants. - Economic policy in the last year has mainly focused on coping with the effects of the COVID-19 pandemic and has substantially diverged before and after the formation of the new government in June 2021. To compensate for the negative impact on economic activity of the lockdown policies, the previous government implemented various short-term plans to support households and businesses. These included extended unemployment benefits, ad hoc universal cash benefits for households, support for the self-employed, and compensation and employee retention grants for businesses • Taxes : Page | 9 - Israel’s taxation policy appears to be quite effective in terms of raising revenues. Over the past five years, Israeli authorities have collected more in tax revenue than had been projected in the government’s budget proposals. Nevertheless, tax revenues in Israel are comparatively low and this sets limits on government spending. - A large share of taxes in Israel are indirect. This includes VAT, which is levied equally on all products. Furthermore, although the direct income tax is progressively structured, and a large portion of the population makes too little money to pay any income tax at all, the system creates a curve that forces middle-income individuals to pay proportionately more tax than high-income individuals. - Over the past year, tax income is up 23.1% from the same period in 2020. - Consequently, the increase of public debt has been relatively low in comparison to other OECD countries. ❖ Distribution of Expenses : - Here is a pie chart of where Israelian spends their earnings for living. - We can see that people in Israel spend 27% of their earnings just for Rent. Page | 10 - Which seems to be high as comparatively Middle East countries. - People spend 29.3% in Markets followed by Restaurants 17.5%. - Transportation spending stands at 11.7% , Utilities at 5.8%, Sports spending at 5.9% and Clothing & Shoes remains at 2.8%. Page | 11