Real GDP growth for the first half of 2007 was 6.6%, 2.5 times more than the average in OECD countries (2.7%).

(Communicated by Israel’s Ministry of Finance, International Affairs Department)

Economic highlights for first half of 2007:

  • Real GDP growth for the first half of 2007 was 6.6%,  up from 5.1% in 2006 and 5.2% in 2005. At this rate, the Israeli GDP growth between 2004 and 2007 will reach more than 20%. 
  • GDP growth is 2.5 times more than the average in OECD countries (2.7%) and is expected to reach 5.4% for 2007.
  • GDP per capita based on PPP (purchasing power parity): $27,688 (21st among OECD members)
  • Private consumption per capita, indicating the quality of life, grew by 4.6%.
  • Unemployment dropped another 0.1% from 7.7% (1st quarter) to 7.6% (2nd quarter), while the rate of employed persons (15 and up) grew from 56.1% to 56.6%.
  • The Consumer Price Index increased by 2.8% (Jan-Aug). In accordance with the economic policy to restrain CPI change to between 1% and 3% annually, BOI rate has been raised to 4.0% to set inflation within the target zone for 2008.
  • For the 1st half of 2007, investment in fixed assets increased by 11.4% while total gross investment increased by 9.3%.
  • Foreign Trade: 6.3% increase in exports of goods and services.
  • Foreign investments: Jan-Aug 2007: $10.6 billion; total for 2006: $24.4 billion (including TEVA-Ivax deal).
  • Foreign direct investments in 2007 are expected
    to grow by 8.0%, reaching $15.3 billion.

Economic growth (1st half of 2007):

  • Real GDP: +6.6% (+3.4% in the 2nd half of 2006)
  • Business GDP: +7.9% (+3.2% in the 2nd half of 2006)
  • Private consumption : +4.6% (+3.7% in the 2nd half of 2006)
  • Exports (goods & services): +6.3% (+3.8% in the 2nd half of 2006)
  • Investment in fixed assets: +11.4%
  • Consumption of durable goods: +34.6%
  • Total private consumption: +6.2%

Latest news:

  • Israeli start-up companies raised $319 million in the 2nd quarter of 2007, a 4% increase from the previous quarter.
  • Israel’s current long-term foreign currency ratings are at:
    S&P: A-; Moody’s: A2; Fitch: A-
  • The IMD has ranked Israel first out of 55 ranked in R&D expenditure, both public and private.
  • The World Bank will sell up to $1 billion of its bonds in Israel, in shekels. Its bonds are sold worldwide in only 30 countries.
  • The USA and Israel have signed an agreement granting Israel $30 billion for defense purposes over a period of 10 years.
  • Tax on apartment purchase was lowered substantially.

The 2008 state budget has been approved by the government,
presented to the Knesset and is now awaiting first reading.

      Main issues:

  • Total expenditure without disengagement and northern conflict costs will rise as planned by 1.7% (same rate as population growth).
  • Education reform: additional working hours for school teachers and additional authorities for principals. As for higher education: wide reform in order to bring back Israeli scientists who are abroad and improvement of research quality using grants and a quality assurance system.
  • Promotion of competition in the cellular communications,
    electricity, public transportation and gas markets.
  • Promotion of competition in the health industry, establishing a 5th health-care authority.
  • Integrating working mothers in the labor force by expanding daycare facilities and further subsidizing according to income.


  • Maintain the budget framework, implementing responsible fiscal policy
  • Narrow socio-economic gaps and rduce poverty
  • Continue to reduce the ratio of public debt (87.7% in 2006) to GDP
  • Reduce the rate of unemployment (in a downtrend – 7.6% in the 2nd quarter of 2007, the lowest in 10 years – but still a challenge)
  • Increase participation rate in labor force
  • Continue reforms, such as reducing corporate tax, reducing the tax burden on low and medium income levels, extending pension benefits, and continuing privatization

Sources: Ministry of Finance, Central Bureau of Statistics, Bank of Israel, Israel Venture Capital, Bank Leumi, Israel Export Institute.