Israel Economic Report : Israel is now the Silicon Valley of The World

When you think of Israel, what comes to your mind? Religious history, rich culture, or historical locations? Full of abundance and luxury, Israel shows its richness to anyone walking down the streets of its cities. The only Jewish nation in the world has played a massive role in global international affairs, and with such a strong economy, notable landmarks, and major cultural significance, it has made its way into the hearts of millions of people. Israel ranks high among other countries when it comes to education, life expectancy, innovativeness, research and development, and happiness, and it also offers the highest standard of living in the Middle East. Over the past few years, Israel became a leader in water use in the Middle East, the country's water shortage has become a surplus. Through a combination of conservation, reuse, and desalination, the country now has more water than it needs. And that could translate to political progress for the countries in the Middle East, one of the most water stressed regions in the world. Israel is already the world leader in water reuse, far outpacing countries like Spain, Australia, and even the United States. Today the desalination plants provide up to 50 percent of Israel's drinking water. Israel enjoys a Solid economic system. Over the past five years, there has been an average annual growth of 3%. In 2017, according to data published by the Israeli Central Statistics Office, In 2018, the GDP growth rate was 3.3%. In the first half of 2019, the economy grew by 3.6%, against 2.8% in the second half of 2018 and 3.5% in the first half of 2018. Forecasts indicate a GDP growth rate for 2019, which will stabilize around 3.2 to 3.4 percent. The unemployment rate at 4.2%. So? How is the public debt? Below 60% of GDP. The inflation rate continues to be low (0.4%), and the Central Bank, to avoid deflationary pressures, keeps the interest rate at minimum levels. Israel is one of the world leaders in high-tech (cybersecurity, defense, biomedical, irrigation, and renewable energy). The share of investments in research and development is equal to 4.3% of GDP. Israel is the first country in the world by the number of start-ups per inhabitant and the second by per capita risk capital investments ($ 293), while in absolute terms, it is the third country by the number of companies listed on the Nasdaq, after the USA and China. Numerous multinational companies have established their R&D centers here for example, Intel, Microsoft, IBM, Google, etc. Welcome to The Atlantis Report. The fundamentals of the Israeli economy in 2018 and in the first months of 2019 prove stable. The country proves to be dynamic, and with interesting growth prospects, factors that attract capital and investments from all over the world, as confirmed by the record data on investments in the hi-tech sector in the first half of 2019 amounted to 3.9 billion dollars (in 2018 the figure was 6.4 billion dollars). The expansive fiscal policies of recent years, with an increase in public expenditure as a percentage of GDP and a reduction in taxation, have seen the Israeli government concentrate its efforts on investments in the sectors of infrastructure, transport, and housing construction. This led to the increase in the deficit, which grew to 2.9% of GDP, well above the 2% target set by the Government, and the increase in the share of public debt on GDP (61% in 2018) which until the previous year it was steadily decreasing (from 67% in 2013 to 60.5% in 2017). The labor market, despite being characterized by an unemployment rate at historic lows (4% in 2018 and 4.1% in the first quarter of 2019) shows first signs of criticality: the number of people employed grows at a slower pace than in the past, with a participation rate of 63.5%. The inflation rate continues to be low although slightly increasing (0.8 percent), and the Central Bank keeps the interest rate at 0.25% to avoid deflationary pressures. There has been a strong appreciation of the shekel since January 2019 (+ 9% in nine months compared to the euro). In 2018 the trade balance recorded a slight surplus (1.01 billion euros). Israel, in 2018, exported goods and services for a value of 101.97 billion euros (+ 4.7%), of which goods for 56.85 billion euros (+ 2.2%) and services for 45.05 billion euros (+ 7.9%). The main export sectors were financial services and those related to information and communication technologies. Israel imported goods and services for 100.95 billion euros (+ 6.3%), of which goods for 72.12 billion euros (+ 7.8%), and services for 28.75 billion euros (+ 3.4%). The EU remains Israel's first trading partner. The United States and China follow. The share of Israeli exports (excluding diamonds) to the EU was stable (42.4%), slightly growing to the USA (13%), stable to China (9.7%), and the rest of Asia (11, 3%). A slight decrease of Israeli imports from the EU, equal to 32.4% (in 2017 it was 34.2%), followed by the United States (23%), China (9.8%, up on 2017, when the share was equal to 6.9%) and the rest of Asia (9.6%). Israel’s economic freedom score is 72.8, making its economy the 27th freest in the 2019 Index. Israel is ranked 2nd among 14 countries in the Middle East and North Africa region, and its overall score is above the regional and world averages. Thanks to strong innovation policy, Israel is considered one of the world's leading countries for the development of new technologies. Israel follows only the United States and China by a number of companies listed on the NASDAQ (83) and is the first country in the world by a number of start-ups per inhabitant and the second by venture capital investment per capita ($ 293). The third country in the world for innovative capacity, Israel invests 4.3 percent of GDP in research and development (3.7 part of the companies of which half are foreign). High technology contributes 12% of the GDP produced by companies , and employs 8.3% or of the workforce with a wage more than double the national average, and today creates about 43% of the industrial exports from the country. In 2017, $ 5.2 billion was invested in hi-tech companies. There are about 5,000 start-ups - every year about 600 and 400 are venture capital agreements - one in eight is successful, and the average of the "exits" is around 80 million dollars (in 2017 the total value reached $ 24 billion, including $ 15 billion for Mobileye only). To date, there are more than 300 research and development centers opened by multinational companies from the United States, Europe, and Asia (for example, Intel, Microsoft, Cisco, IBM, Google, Facebook, and others). An increasing number of international investors have come to believe that the state of the Israeli economy can be assessed independently of concerns about regional geopolitical stability. The factors that have favored the scientific and technological development of the country - in addition to the high national expenditure on R&D - must be sought in the following targeted investment policy strategies in the sectors considered strategic; deep synergies between academic research and industrial research; complete internationalization of research programs; strong presence of both Israeli and foreign (especially American) venture capital funds; legislation that aims to encourage Israeli companies to invest in R&D projects, ensuring the State's participation in related commercial risks; transfer of know-how from military industries in which new technologies are tested, subsequently applied to civil uses; immigration flows from the countries of the former Soviet Union, which have increased the number of skilled labor force. Cyber ​​Security is a sector considered particularly strategic for the country, given the particular geopolitical situation. The need to protect the country's IT networks and critical infrastructures against external threats has led the Israeli government to give absolute priority to the Cyber ​​Security sector in all its aspects. To cope with this new reality, the Israeli government launched a vast cybersecurity program eight years ago, mobilizing industry, universities, public institutions, and the Ministry of Defense. A further opportunity for foreign companies in the cyber sector, which can be properly exploited, is the opportunity offered by the organization in Rome, since 2016, of the European edition of Cybertech, the famous Israeli exhibition for the cyber industry. The country has a high international opening, and the high tech sector is positively driving both exports of goods and services. Another strategic sector is the energy sector: the recent discoveries of new and rich natural gas fields are a factor of a potential increase in future exports (estimated starting from 2021 only) and also of lower economic dependence in the sector, with a consequent reduction in the deficit of the trade balance. Israel also has a High corporate culture. Pragmatism, cultural heritage, tenacity, ambition, risk-taking, the absence of formalisms, and governmental support have fostered research and innovation and the creation of important synergies between the business world and the scientific and academic world. ISRAEL INTERNATIONAL RELATIONS. Israel continues to follow developments in the region with great attention and apprehension in a phase of growing fluidity. However, the instability of the area did not change the level of trust of the international rating agencies and international markets. Particular attention for Israel remains the constant Iranian threat perceived with concern both in the context of the nuclear agreement (JCPoA) and in the Syrian quadrant where the Iranian presence has increased considerably; the crisis in Syria and the external actors in the country; the danger of "spillover" in Lebanon and the logistical support of Tehran for Hezbollah; the need to preserve the stability of Egypt under the leadership of General Al Sisi. The stalemate of the Peace Process between Israelis and the Palestinian Authority persists, and at the same time, tension remains high with Hamas, which controls Gaza. In Conclusion. Israel is today an industrialized country with most of its manufacturing, including many traditional fields, based on intensive and sophisticated research & development and hi-tech processes, tools, and machinery. This is the outcome of very rapid and intensive development. Today's dynamic, widely diversified industrial sector was developed from small workshops, originally established since the end of the 19th century to manufacture farm implements and process agricultural products. Two incentives brought about the initial transformation of these workshops into more modern factories - the immigration of entrepreneurs and experienced engineers from Germany in the 1930s and the increasing demand for industrial products during World War II (1939-45) as the Allied forces in the region required various commodities, especially clothing and canned foods, and the region needed products that could not be imported from Europe because of the war. Until the 1970s, traditional industries such as food processing, textiles and fashion, furniture, fertilizers, pesticides, pharmaceuticals, chemicals, rubber, plastic, and metal products, provided most of the country's industrial output. In that period, most resources were directed toward developing agriculture, food production and processing, laying infrastructure, and providing quick employment of many unskilled immigrants. The next phase of industrialization concentrated on developing and manufacturing weapons needed for the defense of the country. It was accelerated because of arms embargoes that endangered the nascent state. The vast investment in aviation and armament industries created new technologies that became the base for Israel's unique hi-tech industries, such as medical devices, electronics, computer software and hardware, telecommunications, etc. In the 1980s, Israelis who worked in Silicon Valley, returned to Israel, opening development centers of multinational companies such as Intel, Microsoft, IBM, and others. In the 1990s, highly-skilled immigration of scientists, engineers, technicians, and medical workers from the former Soviet Union enabled the upgrading of Israel's industry to its current level of sophistication, with its array of export products. Due to its lack of natural resources and raw materials, Israel's one advantage is its highly qualified labor force, scientific institutes, and R&D centers. Today Israeli industry concentrates mostly on manufacturing products with high added value by developing products based on Israel's own scientific creativity and technological innovation. This was The Atlantis Report. Please Like. Share. And Subscribe. Thank you.














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