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Israel’s economy – persistent defiance of conventional wisdom

In defiance of the jagged cutting edge of the Middle East, the inherent regional unpredictability, uncertainty, instability, violence, brutal Islamic intolerance of the “infidel” and the lack of formal diplomatic relations with most of its neighbors, Israel has displayed a unique level of resilience, steadfastness, stability and creativity. For example:

1. All-time record in tourism to Israel: a 38% increase in the number of tourists in April, 2017 over April 2016; a 28% increase in the number of tourists during January-April, 2017 over January-April, 2016.
2. According to Bank of Israel: Israel’s GDP per capita is $38,400 ($36,300 in Q1/2016); unemployment rate is 4.2% (4.4% in Q1/2016); inflation is 0.7% (0.9% in Q1/2016 and 450% in 1985); public debt-to-GDP ratio declines for seventh straight year to 62.1% (64.1% in Q1/2016 and 80.3% in 2006); external debt-to-GDP ratio reduced to 28.6% (30% in Q1/2016).
3. According to the Economist Intelligence Unit (May 18, 2017), Israel’s household consumption per head rose by 5.2% in 2016, overtaking that of the United Arab Emirates, comparable to France and Singapore, but well below the US and UK. “It reflects Israel’s declining unemployment, combined with a higher labor participation rate (in the ultra-orthodox and Arab sectors), an accommodative monetary policy, a strong local currency and falling global prices… helped by relatively high population growth. The number of immigrants entering the country rose in 2014-15 to its highest level since 2003…. Israel has largely overcome relatively low rainfall owing to desalination and sewage-recycling, and is now a major exporter of water technologies…. Israel spends a higher proportion of its GDP on civilian R&D than any other country.  Its high spending on military R&D has had positive effects for the civilian technology sector… encouraging high rates of productivity growth.  The local workforce is highly educated with more than 50% of the population enrolling in tertiary education….”
4. MizMaa, a Chinese venture capital fund, established in 2016, owned by three affluent Chinese families, and headed by a former Deputy President of J.P. Morgan in Asia, is investing $100mn in 15-18 Israeli startups in the areas of cyber security, autonomous vehicles, FinTech, artificial intelligence, robotics and cloud computing. $20nm were already invested in 6 Israeli startups (Globes Business Daily, June 14, 2017).
5. India is emerging as one of Israel’s leading trade partners, militarily and commercially. Two months following a sale of $2bn missile defense systems to India, a sale of $630mn additional missile defense systems was announced (Globes, May 22).
6. Bill McDermott, the CEO of Germany’s SAP, the world’s third largest software company: “Israel’s technology market – per size of population – is the most exciting in the globe. The number of Israeli engineers and scientists and the size of R&D investment – per capita – are the highest in the world. SAP will double its focus on Israel.” SAP employs 700 persons in Israel (Globes, June 1).
7. Germany’s Porsche announced its intention to invest a few scores of millions of dollars in Israeli autonomous-car startups (Globes, June 2).
8. Microsoft acquired the three-year-old Israeli cyber security company, Hexadite, for $100mn (Globes, May 25).  UroGen, the Israeli developer of urological cancer treatment, raised $58mn on Nasdaq, 20% above expectations (Globes, May 8).



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Straight from the Jerusalem Boardroom #248
https://bit.ly/3u29k9g

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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