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Israel’s 60 Years of Breakthrough Economy – Wall Street Overpowers Gaza Strip

The 1948-2008 series of Arab-Israeli wars, coupled with Palestinian terrorism, have been bumps on the path of unprecedented Israeli economic growth: From a $1.2 billion GDP in 1948 to a $170 billion GDP in 2007! From a labor and land-intensive import-based economy, which is vulnerable to security and political uncertainty, to an increasingly know-how intensive export-driven economy, which is less vulnerable to wars and terrorism.

 

Sixty years ago, Israel was labeled as an economy-deprived country.  In 2008, the “London Economist” claims that “Israel has an economy with the power to astonish…[featuring] most NASDAQ-listed companies, other than Canada and the US.” Israel has been recently admitted to the OECD – the exclusive club of the leading global economies – the shekel has joined thirteen other top-traded currencies, and Israel’s credit rating has been upgraded by Moody’s, Standard & Poor and Fitch.

 

During the last four years, Israel’s economy has grown 5% annually, compared with a 2.7% annual growth for the OECD countries.  Despite the draining 2006 war in Lebanon, the costly 2005 “Disengagement” from Gaza, the unprecedented Palestinian terrorism and prolonged political uncertainty, Israel’s economic fundamentals have been vigorous: minimal budget deficit (1%), low inflation (2.8%) and interest (5%) rates, surplus of trade balance ($4 billion) and balance of payment ($5 billion) and high foreign exchange reserves ($28 billion). 

 

400 global (mostly US) companies have established plants and research & development centers in Israel.  They express confidence in the long-term viability of Israel’s economy, notwithstanding the failing peace process and the exacerbation of Palestinian terrorism.  For instance, most of Intel’s chips and microprocessors have been developed by Intel-Israel.  Hence, Intel constructs its sixth ($4.5 billion) Israeli plant, which will boost the 2007 $1.5 billion export by Intel-Israel.  

 

IBM has just acquired its third Israeli company in 2008 and Microsoft concludes its seventh Israeli acquisition in recent years.  HP, Texas Instruments, GE-Medical, Motorola, Cisco, EMC, AOL, Google, Marvelle, Kodak, AT&T, Xerox, Phillips, SAP, Siemens and more giants have followed suit.  They have realized that in order to play in the top high tech league, they must set foot in Israel, thus gaining access to Israel’s unique breakthrough technologies.  They leverage Israel’s competitive edge: generating groundbreaking technologies. 140 per 10,000 Israelis are engaged in research & development, ahead of the US and Japan with 85 and 70 per 10,000 respectively. As a result, Israel is second only to the US in the absolute number of start-ups, but leads the world in the number of start-ups per capita.

 

Overseas investment in Israel’s high tech exceeds any single European country and surpasses France and Germany combined.  Total overseas investment in Israel reached $23.4 billion in 2006, compared with $10.5 billion in 2005, $9.1 billion in 2004 and $5.1 billion in 2003.  In addition to warren Buffet, who made his highest overseas investment in Israel ($4 billion), overseas investors include leading investment banks, such as Goldman Sachs, J.P. Morgan and Morgan Stanley, prestigious venture capital funds, such as Sequoia, Greylock and Benchmark, prime insurance companies such as Mass Mutual, AIG and Marsh McLennen and state employees pension funds such as California, Illinois, New York and Oregon. 

 

According to Morgan Stanley, “Israel’s economy is robust, able to withstand geo-political constraints and global slowdown, featuring a strong shekel, low interest rate, reduced inflation and budget deficit, a trade surplus and surge in overseas investment.”

 

Israel’s 60 year impressive economic track record constitutes a proof that – when it comes to the impact on sophisticated economies – the performance of Wall Street supersedes the terrorism of Gaza Strip.

 




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Foreign investment in Israel’s high-tech companies surged to new heights in the 1st quarter of 2021 – $5.7bn in 172 deals – which is up 89% over the impressive 4th quarter of 2020 and double the volume of the 1st quarter of 2020.

2020 was the first year of surpassing $10bn in capital raised by the Israeli high-tech sector from investors in the US, Asia and Europe, who trust the maturity of Israel’s brain power. Investments in Israeli companies more than tripled in six years, reflecting the effective response by Israeli startups to the technological, medical, pharmaceutical, educational, social and digital challenges posed by Covid-19.

Israel’s economic performance in defiance of Covid-19 is presented by Dr. Adam Reuter, the Chairman and Founder of “Financial Immunities,” Israel’s largest financial-risk management firm, and the co-author of Israel – Island of Success:

  1. Israel has led the globe in the rapid administration of Covid-19 vaccinations due to effective negotiations with Pfizer and an efficient, country-wide medical infrastructure.
  2. Israel is the second lowest among OECD countries in the number of Covid-19 deaths per number of Covid-19 cases: 0.7% compared to the 2.3% OECD average. Israel features a young population (median age of 30 compared to the OECD’s 42) and an effective country-wide medical infrastructure, including top level HMOs and hospitals.
  3. Israel is ranked 12th from the bottom among the 37 OECD countries in the number of deaths per million inhabitants: 645 compared to 1,145 OECD average.
  4. The International Monetary Fund’s 2025 GDP growth forecast for OECD countries: Israel – 4%, OECD average – 2.2%, US – 1.8%, Australia – 2.5%, Ireland – 2.6%, France and Canada – 1.7%, the UK – 1.6%, Germany – 1.2%, etc.
  5. Israel’s 2020 GDP was reduced by 2.5%, compared to the OECD average reduction of 4.1%, South Korea – 1%, Norway – 0.8%, Australia – 2.6%, US – 3.5%, Japan – 4.8%, Germany – 5%, France – 8%, the UK – 10% reduction, etc. GDP growth was recorded in New Zealand – 2.4% and Ireland – 3.5%.
  6. In 2020, Israel was ranked 20th among the 37 members of the OECD in terms of GDP per capita, featuring $43,000 (GDP – $408bn), ahead of Japan, Italy and Spain, and very close behind the UK ($44,000) and France ($45,000).
  7. Israel’s debt-to-GDP ratio increased from 60% in 2019 to 72% in 2020, compared to the OECD’s average increase from 66% to 82%. The 2020’s debt-to-GDP ratio was 266% in Japan, Italy – 161%, the US – 131%, Germany – 73%, etc.
  8. Israel’s foreign exchange reserves-to-GDP ratio of 41% (3rd among the OECD countries) attests to its financial stability, and Israel’s capability to raise foreign credit promptly in a cost-effective manner. Israel’s foreign exchange reserves in March 2021 – $186bn.
  9. During the past decade, Standard and Poor (S&P) accorded Israel a positive credit rating trend, unlike the negative trend for the G-7 countries. In 2020, notwithstanding Covid-19, Israel’s credit rating (S&P) remained at AA.
  10. Some 380 global high-tech giants operate in Israel, including Microsoft, Amazon, IBM, Intel, Cisco, Apple, Verizon, Applied Materials, Dell, HP, Kodak, Oracle, Philips, SAP, Medtronics, GM, eBay, GE, etc. Israel leads the world in the ratio of research and development investment to GDP: 4.9%. 85% of this investment comes from the business sector.

 




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