May 24 th 2011 The Israeli Economy. GDP ($Billion) 218 Population (3/2011, Million) 7.7 GDP per...

May 24th 2011

The Israeli Economy

• GDP ($Billion) 218• Population (3/2011, Million) 7.7 • GDP per capita ($) 28,560• Foreign Trade (% of GDP) 72% • Total Exports (% of GDP) 37%• Unemployment (2/2011) 6%

The Israeli Industry

• Share of business sector 21% • Industrial Sales ($Billion) 95• Industrial Exports (% of sales) 43% • Employees 350K• Main branches: Chemicals, Electronics & Food2

The Israeli Economy – 2010 Facts & Figures

The Manufacturers' Association of Israel

Construction Transport, storage and

communications

Commerce, restaurants and

hotels

Manufacturing Finance and business services

7%10%

15%

21%

41%

The Business sector - Main Branches

The Israeli Economy Resilience

During the Global Crisis


4

5The Manufacturers' Association of Israel

0.8%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

Fin

lan

dR

uss

iaIr

elan

dJa

pan

Mex

ico

Sw

eden

Ital

yD

enm

ark

UK

Turk

eyG

erm

any

Net

her

lan

ds

Au

stri

aS

pai

nB

elg

ium

US

AF

ran

ceP

ort

ug

alC

anad

aN

ew Z

eala

nd

Gre

ece

Sw

itze

rlan

dS

ou

th A

fric

aN

orw

ayB

razi

lS

aud

i Ara

bia

Isra

elA

ust

rali

aP

ola

nd

Ind

iaC

hin

a

Source: IMF April 2011

Advanced and Selected Emerging Economies,Real GDP growth, 2009

Positive Growth in Israel Vs. Regression in Most Developed Countries

A Short Recession in the Israeli Economy


6

6.2%

3.6%

1.0%

-2.0%

-2.9%

1.5%

3.8%

4.9% 5.0%5.5%

4.8%

7.6%

4.7%

6.5%

4.0%

0.5%

-3.0%

-5.0%

2.3%

3.7%

4.9%

6.8% 6.7%

5.1%

8.7%

5.8%

Q1/08 Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Q1/11

GDP Business GDP

GDPReal Changes in GDP, Each quarter against Previous, at Annual Rate, S.A. Data

Relatively Moderate Regression in Israeli Industry

Source: OECD, CBS & MAI Economic Research Department The Manufacturers' Association of Israel 7

4%

0%

-4% -4% -4%-6%

-10%-10%-11%-11%-11%-12%-13%

-15%-16%

-17%-18%-19%

-21%

Real Industrial Output Change, 2009 compared to 2008

ʺ ʥhʥʤ ʥhʩʣʮʤʯʩʡʤʩʩ ʲ ʺ ʤʩʢʥʥʩɦʺ ʥyʣʢʤʡʭʩʬʷʭʩʬʣʡʤʭʩʮʩʩʥʯʫ ʩ

The Israeli Economic Resilience Key factors• Strong starting point

• Conservative Management

• High-tech oriented growth

• Export flexibility - Diversion of trade

• Flexible labor market

• Expanding monetary policy

• Responsible fiscal policy

• Social partnership model

• Automatic stabilizers - budget was not approved until mid 2009

The Manufacturers' Association of Israel 8

Before the Crisis:5 Years of Rapid Growth in Israeli

economy


GDP GDP per Capita Business Sector GDP

5.1%

3.2%

6.9%

4.9%

3.0%

5.8%5.7%

3.8%

7.0%

5.3%

3.4%

5.9%

4.2%

2.4%

4.7%

0.8%

-1.1%

0.1%

4.7%

2.8%

5.4%

The Israeli EconomyReal Annual Changes

Before the Crisis:5 Years of Rapid Growth in Israeli

industry


Industrial Production Industrial Export Employees

7.0%

17.6%

1.1%

3.7%5.0%

1.6%

9.8%

11.7%

2.8%

4.5%

12.2%

3.8%

7.4%8.6%

1.7%

-6.0%

-8.3%

-4.8%

7.7%

16%

1.6%

Real Annual Changes

Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Jan-11 Feb-11

6.0% 6.0%6.5%

7.5%7.8% 7.7%

7.3%6.9%

6.4% 6.6% 6.6%6.1% 6.0%

A Continuous Improvement in Unemployment RateAs Percent of Civilian Labor Force

Before the Crisis: Relatively Low Unemployment Rate


0.3%

-1.3%

-3.7%

-4.5%-4.91%

-0.90%

0.5%

1.7%

3.1%

5.0%

2.9%

0.8%

3.9%

3.2%

A Surplus in The Balance of Payments Current AccountAs Percentage of GDP

Independent of Outside Funding A Continuing Current Account Surplus

Source: CBS & MAI Economic Research Department


12

The continual surplus in the current account + the large amount of foreign currency reserves (77 billion $), enable Israel to provide its import needs without depending on external financing.

The balance of: foreign trade, net factor income and net transfer payments.

The Israeli Economic Resilience

• Strong starting point










Relatively High Private Saving Rate in Israel


14

Source: OECD & CBS

Household saving rates - Percentage of disposable household income, 2009

2.2%

5.9%

11.1%12.9%

13.4%16.8%

0% 2% 4% 6% 8% 10% 12% 14% 16% 18%

DenmarkSlovak Rep.

JapanPoland

HungaryKorea

FinlandCzech Rep.

CanadaAustralia

United StatesNetherlands

ItalyNorwayIrelandAustria

SwitzerlandGermany

SwedenBelgium

Israel

Source: OECD & CBS

Household saving rates - Percentage of disposable household income, 2009

Relatively Low Household Debt in Israel Household Debt to Disposable Income Ratio

יחס החוב של משקי הבית להכנסה הפנויה

צרפת

גרמניה

ארה"בספרד

קנדה

ישראל

בריטניה

30

40

50

60

70

80

90

100

110

120

2000 2001 2002 2003 2004 2005 2006 2007 2008

%

GBUSA

SpainSpain

Canada

GermanyIsrael

France

Source: Bank of Israel The Manufacturers' Association of Israel

15

The Banking System Conservative & Supervised

%

Source: Bank of Israel The Manufacturers' Association of Israel

16

Capital Adequacy Ratio (CAR) - The ratio of bank's capital to its risk assets.

Bank Nonperforming Loans to Total Loans -Low Ratio in Israel

17

The Manufacturers' Association of Israel Source: IMF

9

5.4

3.5 3.3

1.7 1.5

0.4

Bank Nonperforming Loans to Total Loans -Low Ratio in Israel Percents, 2009

Nominal Change in Average Apartment Price, 1997-2007

Real Estate Prices- Relatively Moderate Increase Before the Crisis

Source: Psagot Investment HouseThe Manufacturers' Association of

Israel

18

World Leadership in Civilian R&D Investments

Source: Israeli CBS The Manufacturers' Association of Israel

20

4.7%

3.7%3.6%3.4% 3.4%

3.0%2.7%2.6%

2.4%2.0%1.9%1.9%

1.6%1.5%1.4%1.3%1.1%1.0%

Israel is The World Leader in Civilian R&D InvestmentAs Percentage of GDP, 20 8

200

4.%

High Share of ICT in the Business Sector

ICT= Information & Communications Technologies, 2006

Source: Israeli CBS The Manufacturers' Association of

Israel

21

15.9 14.8

13.7

12.1

10.9 10.8 10.7

9.2 8.7 8.4 8.3 7.9 7.9 7.9 7.6 7.6 7.5 7.5 7.1 7.1 6.9 6.8 6.7

5.0

ICT Sector GDP, Out of The Business Sector GDP 2006

2009

16

%

-16%

-22%

Industrial Export Industrial Export Excl. Electronic Components

Real changes, Q2/09 compared to Q3/08 , S.A.

Electronic Components Branch (Intel) Moderated Industrial Export Regression


6%

Industrial Export

23


2.3%

-2.3%

2.0%

-6.3%

-8.2%

-2.0%

9.5%7.9%

9.8%

-3.9%

-0.7% -0.2%

8%

4%

Q1/08 Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Jan. - Feb. 11'*

Mar. - Apr. 11'*

ʩʩʩʲ ʺ ʤʠʥʁʩʤ ʥʧʺ ʴ ʺ ʤReal change rates, S.A, each period against previous period

*Estimated export prices.

-

To Industrial Output To Employment in Industry

To Industrial Export

78%

65%75%

The High Tech Sector Contribution to Industrial Growth in 2004-20

As Percentage of Total Growth

The High Tech Sector Contribution to Industrial Growth


2004-2010

Structural change in the Israeli industry


25

29%22%

0.0

38% 34%

38%

34%

0.0

39%39%

33%44%

0.0

23% 27%High Tech

Mixed Tech

Low Tech

ʩhʡʮʩʥhʩʬʹ ʩʰʹ ʡʸ ʪʩʬʤ ʺ ʸ ʡʥʤʩʩ ʲ ʺ ʤ

Production Distribution Employment Distribution

Other Asia US EU

23%

15%

28%

34%

22%

20%

28%

30%

Distribution of export according to areasDiversion of Trade to Asian Countries


57%

16%

17%

3%

6.0%

3.8%

1.1%

-1.2%

-2.4%

0.3%

-1.1%-1.6%

-2.1%

-4.2%

-2.1%-1.8%

0.0%

0.8%1.6% 1.7%

-0.4%

Real Wage in Business SectorReal Changes, Compared to the Parallel Period in a Previous Year

Employment Flexibility


Real Decrease in Wages at the Israeli Business Sector

29

The Israeli companies used extraordinary measures during the crisis, including: 1.Reducing Overtime2.Concentrated Vacation3.Non Payment Vacation4.Shortened Workweek

30


4.9%4.2%

2.9% 3.0%

0.1%

-0.1% 0.0%

-1.0%

-0.1%

3.1%

5.0% 4.8%

Q1/08 Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10

Q4/10: Dismissals Workers in the Business SectorChange rates, Each quarter against Parallel quarter in a Previous Year, S.A. data

Relatively moderate Dismissals Workers in the Business Sector

+76K

Expanding Monetary PolicyInterest Rates of Central Banks Over the World

%

Crisis begins

Northern Rock Lehman-Brothers collapse

Israel

Source: Bank of Israel32


Exceptional measures: Buying foreign currency & bonds

Foreign currency reserves: 3/2008 – 29.4 billion $4/2011 – 77.4 billion $

Buying government bonds through open market operations: 263 million NIS

Responsible Fiscal PolicyRestrained Government Budgetary Deficit

As Percentage of GDP


34

Source: Ministry of Finance

6%

5.5%

3%

2%

5.2%

3.7%

2.3%

Target Deficit Actual Deficit

As percent of GDP

(est.)

Relatively Low Government Deficit in Israel

Source: Eurostat, IMF, MOF


32.4%

10.6% 10.5% 10.4% 9.5% 9.2% 9.1%7.0%

5.4%4.6% 4.1% 3.7% 3.3% 2.7% 2.5%

0.0%

Israel’s Government Deficit is Relatively LowAs Percent of GDP, 2010

Continuous Reduction of Public Debt Ratio


Source: Ministry of Finance

36

99 97.493.8

84.578.3 77.2 79.6

76.6

Continuous Reduction of Public Debt Ratio

Public Debt as Percentage of GDP

As percent of GDP

Relatively Low Public Debt Ratio


Source: Ministry of Finance, Eurostat, IMF

37

220.3%

142.8%

119.0%

96.8% 96.2% 93.0% 91.6%83.2% 81.7% 80.0% 76.6% 72.3%

62.7% 60.1% 55.0% 48.4% 43.6% 39.8%

As percent of GDP, 2010









• Social partnership model• Automatic stabilizers - budget was not approved until mid 2009


Round Table Forum

Social Partnership ModelGovernmentGovernment

EmployersEmployers EmployeesEmployees


Roundtable Forum• An advisory forum to the Israeli Government on matters

of social and economic policies, which aimed to deal with the economic crisis. (established on 4/2009).

• Members: representatives of the government, employers and employees.

• The goal: to achieve better cooperation in order to cope with the economic crisis and to create conditions for sustainable growth.

• The Roundtable led to the package deal of 2009-2010, in which each side contributed his Share to the Burden


Round Table Forum

Social Partnership ModelGovernmentGovernment

EmployersEmployers EmployeesEmployees


Incentives for the business sector:• Investment grants• State guarantees• Medium-sized businesses fund

Acts to maintain competitiveness: Freezing costs like property tax, water, electricity.

Tax reform

Reducing by 50% the public service employees’ holiday pay during 2009-2010.

Increasing by 0.4% the national insurance employers taxes (up to

level of 60% of average wage).

45%

25%

45%

24%

45%

24%

44%

23%

43%

22%

42%

21%

41%

20%

39%

18%

Marginal Income Tax Corporate Tax

Reducing Direct TaxesTax Reform Path


A Sharp Decrease in the Number of Strikes

43


1,975

148

Strikes and Lock-Outs Work days Lost, thousands

- -

Number of Working Days Lost due to Strikes and Lock-Outs

OpportunitiesThreats

20112011


2011 Threats

• An expected slowdown in global trade

• High level of commodity prices

• Inflationary pressures & rising interest rates

• Exchange rate appreciation

• Wage pressure

• Increased local costs

• Geopolitical instability

• Business environment

• Off-shoring


45

Local

Global

13.3%

-0.3%

3.7%

6.3%

10.8%

7.5%8.8%

7.1%

2.7%

-12.0%

12.5%

7.0%6.0%

2011 Frcst

2012 Frcst

Volume of World TradeAnnual change, trade in goods

Source: The Economist, 7/4/11

46

A correlation of 0.81 between world trade and industrial exports

An Expected Slowdown in World Trade


A peak in raw materials prices

42%

77%89%

87%

37%

107%91%

85%

34%

55%70%

61%52%

-18%

39%

128%

200%

146%

126%

-25%

25%

75%

125%

175%

225%

Base metals

Industrial raw metrials

Crude oil

Rubber

Global raw metrials prices - ForcastUS $ index, Cumulative rate of chnage, Since Q4/08

Source: Economist, March 2011Industrial raw metrials (IRM) is a price index of 9 hard commodities.


8.8%

0.6%

-4.4%

-6.0%

-4.5%-6.2%

-6.3%

-8.9%

-10.3%-9.9%-10.0%

-7.9%-7.4%

-0.3%

3.4%

5.5%4.6%

5.5%5.0%

6.3%

3.5%

1.9%2.7%

1.6%

3.4%3.1%3.6%

6.1%7.2%

7.7%7.3%

Original Data

Trend Line

Industry raises pricesPPI of Manufacturing Output for the Domestic Market

Rates of change, each period compared to the parallel period last year

Manufacturing Output Price


Housing CPI, Excl. housing CPI

6.0%

3.5%

4.0%

Change in Consumer Price Index, Apr. 2011 compard to Apr. 2010

49

The expected rate of inflation according to :3.2%Capital market =

B.O.I = 3.2% 3.1%Economists forecasts =

Accelerated Inflation


3%3.25%

3.5%3.75%

4%

B.O.I Interest Rate

Fed Interest Rate

Bank of Israel's Expected Interest Rates According to the Capital Market

0% - 0.25%

Gap

: 2.7

5%

Gap

: 3.7

5%

Source: Leumi Bank, 22/5/2011

Interest Rates Spread Between Israel and USA is Expected to Increase

Share of foreign investors in total T bills

1.5%1.3%1.4%1.2%1.2%1.0%0.9%1.8%3.7%

5.1%4.3%5.1%

10.4%10.7%12.3%

20.2%

22.4%

19.5%21.6%21.2%

17.5%

27.7%27.0%

28.3%

34.0%35.7%

33.4%

1.75%

1.00%

0.75%

0.50%

0.75%

1.00%

1.25%

1.50%

1.75%

2.00%

2.25%

2.50%

Share of Foreign Investors in T Bills

Bank of Israel Interest Rate

Source: Bank of Israel

Share of foreign investors in total Treasury billsPercents

1.

Billi

on $

Source: Bank of Israel

Share of foreign investors in total Treasury billsPercents


Purchase of Israeli Short-Term T.B by Foreigners

Vs. Purchase of Dollars by Bank of Israel

52


1.3

0.20.5

2.4

0.8

-0.7

1.0

0.3

-0.9

4.2

-0.3

0.6

2.1

0.2

-0.7

1.6

0.20.5

2.5

0.6

0.0 0.1

0.6 0.7

3.4

0.0

1.82.1

0.20.0

Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11

Purchase of T.Bills by Foreigners

Purchase of Dollars by Bank of Israel

Purchase of Israeli Short-Term T.B by Foreigners Vs. Purchase of Dollars by Bank of Israel

billions of $

Jan 2010 - Mar 2011:Bank of Israel purchased billion $Foreginers purchased billion $ worth of Short Term T.B. correlation of 0.88 between the 2 series

Israel: A Sharp Revaluation Compared to Main Competitors


-31%

-25%

-20% -19%-17% -17%

-13%

0%

6% 7%10%

Japan Israel Malaysia China Euro Area

Canada Taiwan India Korea UK Mexico

Change in Local Currency Against US Dollar, 1/1/2006- /5/2011NIS=(

Israel: A Sharp Revaluation Compared to Main Competitors

2011 Appreciation Damages at 3.5 NIS/$ scenario

Manufacturers forecast

– Total transactions loss: 3.4% ($ 3.4B)

– Export transactions loss: 6.6% ($2.9B)

– Local market transactions loss: 0.9% ($ 0.5B)

– Employees (existing and/or prospective) loss: 2.5% (9K)

Source: M.A.I Economic Research Department , Survey - oct. 2010


55

-2.4% -2.1%-2.6% -2.7% -2.5%

-2.1% -2.0% -2.1%

0.7%

2.6%

1.1%

2.4%

0.3%

Q1/08 Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Jan-Feb 11

*Average wage per employee job

Change rates, Compared to the Parallel Period in a Previous Year

Real Wage in Industry


50% 50%48%

45% 44% 43%41%

37% 37% 37% 36% 36%

Minimum Wage

ʭʥʩʡʭʥʮʩhʩʮʤy ʫʺ ʰʹ ʪʬʤʮʡʩʣʥʧ ʤ ʴ ʰʬʲ ʶʥʮʮʤy ʶʥʤʮʦʥʧ ʠʫ

56

Ratio of minimum to mean wage, 2008

Source :OECD

Minimum Wage


Logistics Performance Indicators, 2010


57

Poland

Czech …

Malaysia

Bahrain

China

Israel

UAE

New Zealand

Korea, Rep.

Taiwan

Luxembourg

Lebanon

Australia

Ireland

Hong Kong

United States

UK

Singapore

Germany

Netherlands

Sweden

3635

3130

2928

2726

23

2221

1917

1614

119

64

32

ʤʭʥʮʡʺ ʢy ʥʣʮʬʠʸ ʹ ʩ-ʺ ʩʨɦ ʩʢʥʬʺ ʬʥʫʩʡ

ʭʩʩʨɦ ʩʢʥʬʤʭʩʥyʩʤ ʥʫʩʠʥʥhʮʥʩʮʯʥʢʫʱ ʫʮʤʩhʫʥɦʥʤy ʥʡʧʺ ʤʩʬʩʴ ʮ

Lebanon

Bahrain

Israel

Poland

Malaysia

China

Czech …

UAE

Korea, Rep.

New Zealand

Taiwan

Australia

United States

Hong Kong

Ireland

UK

Luxembourg

Netherlands

Sweden

Singapore

Germany

3332

3130

2927

2624

23

2120

1815

1311

85

43

21

ʤʭʥʮʡʺ ʢy ʥʣʮʬʠʸ ʹ ʩ-ʭʩʨɦ ʩʢʥʬʤʭʩʥʁʩʡʤʣʣʮʡ

LebanonBahrain

IsraelUnited States

PolandChina

New ZealandCzech Republic

Korea, Rep.UAE

MalaysiaNetherlands

TaiwanGermany

UKLuxembourg

Hong KongIreland

AustraliaSweden

Singapore

6954

4236

3527

2317

1514

1311

109

87

65

32

1

ʤʭʥʮʡʺ ʢy ʥʣʮʬʠʸ ʹ ʩ-ʩʮʥʠʬʰʩʡʧʥʬʩʣʣʮʡ

ʩ ʥyʧʺ ʸʩʧʮʡʯ ʨʮʧʥʬʹ ʮʯʥʢy ʠʺ ʥʬʷ

Poland

Lebanon

Czech Republic

Bahrain

Malaysia

China

New Zealand

Israel

Korea, Rep.

Taiwan

Ireland

Australia

UAE

UK

Hong Kong

Sweden

Luxembourg

United States

Singapore

Netherlands

Germany

4341

3430

2827

2624

2322

1918

1716

1310

97

42

1

ʤʭʥʮʡʺ ʢy ʥʣʮʬʠʸ ʹ ʩ-ʺ ʥʩʹ ʺ ʤ ʥʫʩʠʡ

ʸ ʧʱ ʬʺ ʸ ʥ ʤ ʥʩʹ ʺ ʤ ʥʫʩʠʠʮʢʥʣʬʭʩʬʮʰʬʦyʡʺ ʥʬʩɦʮʭʩʩʡʫʲ ʣʩʮʺ ʩʢʥʬʥhʫʨ

Source: Connecting to Compete 2010: Trade Logistics in the Global Economy, report of the World Bank, 2010.

LPI Total RankingLogistics competence

International shipments Infrastructure

5350

47

3734

Quality of port infrastructure

Quality of roads Quality of overall

infrastructure

Quality of air transport

infrastructure

Quality of electricity

supply

Israel's ranking World Competitiveness Report 2010-2011 Selected sections of the infrastructure index

israel is ranked the 34th place in Infrastructure index

58

Quality of Infrastructre

The Global Competitiveness Report 2010/11 of the WEF, out of 139 countries.

19% 20%22% 23% 24%

45%

Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Q1/11

ʥʧʬʸ ʥʁʩʩʩʥʥ ʥyʩʡʲ ʮʤʩʩ ʲ ʺ ʤ ʥyʡʧʬʺ ʫ ʮʺ ʮʤʩʩʬʲʥʧʡʺ ʩhy ʶʩʥʬʩʴ ʯʤʬʺ ʥyʡʧʤy ʥʩʡʬ

In about a year, 45% of companies will have a manufacturing activity abroad.

Today, 28% of companies have manufacturing activity abroad.

ʤʩʩ ʲ ʺ ʡʺ ʥʩɹʩʁʤy ʷʱ ʩɹʬʤʬʫʬʫr ʢʠʭʩhʩʩ ʲ ʺ ʤ ʥʣʧ ʠʺ ʤ

59

Shifting Production Lines Abroad

Source: Survey of Expectations in Industry of MAI

• Global Growth

• Increased Domestic Demand

• Negative to zero Real interest rate

• Attractive Company Tax Level

• No Credit Crunch

• Responsible Fiscal Policy Persistence

• A good starting point for 2011

Local

Global

2011 Opportunities


China India Japan Euro area US OECD

10.3%

9.1%

4.0%

1.7%

2.9% 2.9%

9.0% 9.0%

1.0%

1.8%2.9%

2.5%

8.7% 8.7%

1.8% 1.5%

2.5% 2.3%

2011 Frcst

Growth ForecastAnnual GDP growth

Source: The Economist, 7/4/11

Global Growth Forecast

61The Manufacturers' Association of Israel

• Wage increase

• Absorption of new employees

• Low unemployment - rate (2/2011 – 6.0%)

• Disposable income Increased due to tax

reduction.

• Positive Wealth effect

Many Factors Supports Private Consumption


0%

6%

5%

-6%

2%

7%

14%17%

21%

19%

27%

31%

Financial Assets Held by The PublicCumulative Rate of Change since Jan. 2008

63

Wealth Effect


10%

10%

12.5%

16%

17%

19%

20%

21%

22%

23%

24%

25%

25%

26%

26%

28%

30%

31%

33%

Cyprus

Bulgaria

Ireland

Rumania

Singapore

Hungary

Russia

Switzerland

EU average

Greece

Israel

Austria

Denmark

Finland

Sweeden

U.K.

Spain

Italy

France

Corporate Tax - 2011

INDUSTRIAL COMPANIES WITH EXPORT CAPABILITYINDUSTRIAL COMPANIES WITH EXPORT CAPABILITY2011-12: 15% - 10%

2013-14: 7% - 12.5%2015: 6% - 12%

INDUSTRIAL COMPANIES WITH EXPORT CAPABILITYINDUSTRIAL COMPANIES WITH EXPORT CAPABILITY2011-12: 15% - 10%

2013-14: 7% - 12.5%2015: 6% - 12%

64

2011

Source: KPMG, www.worldwide-tax.com

Corporate Tax

No Credit CrunchThe percentage of manufacturers reporting some

difficulty in getting new credit:

55%52%54%

44%43%42%46%

38%44%

71%67%

56%

48%48%46%48%

40%41%

ʺ ʥʩɹʩʁʸ ʷʱ-ʩʠʸ ʹ ʠʺ ʷʥʁʮʬʺ ʥʩʁʷʩʣhʩʠ

ʹ ʣʧʩʠʸ ʹ ʠʺ ʬʡʷʡʩʥʺ ʮʩʩʤʩʠʸ ʹ ʠʤ ʸ ʢɦ ʮʬʲ ʤy ʩʮʹ ʡʩʥ

Source: Survey of Expectations in Industry of MAI

Responsible Fiscal Policy Persistence2011-2012 Biennial Budget

• Increased certainty & stability

• Improved governmental planning processes - Long-term planning

• Increased Efficiency

• Reduced Political pressure.

New Formula to Limit Government Expenditure • Target = Reducing Debt/GDP ratio while maintaining an

adequate level of public services.

• Formula:


66

60% / (Actual Debt/GDP) X (Annual growth rate in the past 10 years)

60% = Target Debt/GDP Ratio According to Maastricht Treaty

MacroeconomicMacroeconomic Forecast for 2011Forecast for 2011

Industrial Output

-14%

7%

19% 20%23%

21%

14%

-6%

-39%

-45%

11%15%

16.5%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

Q1

/02

Q2

Q3

Q4

Q1

/03

Q2

Q3

Q4

Q1

/04

Q2

Q3

Q4

Q1

/05

Q2

Q3

Q4

Q1

/06

Q2

Q3

Q4

Q1

/07

Q2

Q3

Q4

Q1

/08

Q2

Q3

Q4

Q1

/09

Q2

Q3

Q4

Q1

/10

Q2

Q3

Q4

Q1

/11

Q2

Observations Trend line

F

Net Balance

Industrial Output, 2002 -2011

Source: Survey of Expectations in Industry, Apr. 2011, M.A.I Economic Research Department (186 industrial companies )

69

Survey of Expectations in Industry

-12% -13%

12%

16%

8%

-30%

7%5%

12%

8%

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

Q1

/02

Q2

Q3

Q4

Q1

/03

Q2

Q3

Q4

Q1

/04

Q2

Q3

Q4

Q1

/05

Q2

Q3

Q4

Q1

/06

Q2

Q3

Q4

Q1

/07

Q2

Q3

Q4

Q1

/08

Q2

Q3

Q4

Q1

/09

Q2

Q3

Q4

Q1

/10

Q2

Q3

Q4

Q1

/11

Q2


Persons Employed in Industry, 2002 -2011Net Balance

F

-28%

-12%

16% 16%19%

-7%

-46%

9% 11%13%14.5%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

Q1

/02

Q2

Q3

Q4

Q1

/03

Q2

Q3

Q4

Q1

/04

Q2

Q3

Q4

Q1

/05

Q2

Q3

Q4

Q1

/06

Q2

Q3

Q4

Q1

/07

Q2

Q3

Q4

Q1

/08

Q2

Q3

Q4

Q1

/09

Q2

Q3

Q4

Q1

/10

Q2

Q3

Q4

Q1

/11

Q2


Sales to the Domestic Market, 2002 -2011

Net Balance

F

13%

26% 24%

19%

-11%

-40%

13%9% 9%

16%

13%

-45%

-35%

-25%

-15%

-5%

5%

15%

25%

35%

Q1

/02

Q2

Q3

Q4

Q1

/03

Q2

Q3

Q4

Q1

/04

Q2

Q3

Q4

Q1

/05

Q2

Q3

Q4

Q1

/06

Q2

Q3

Q4

Q1

/07

Q2

Q3

Q4

Q1

/08

Q2

Q3

Q4

Q1

/09

Q2

Q3

Q4

Q1

/10

Q2

Q3

Q4

Q1

/11

Q2


Export Shipments, 2002 -2011Net Balance

F

5%

15%13%

7%

11%

-35%

-25%

-15%

-5%

5%

15%

25%

Q1

/02

Q2

Q3

Q4

Q1

/03

Q2

Q3

Q4

Q1

/04

Q2

Q3

Q4

Q1

/05

Q2

Q3

Q4

Q1

/06

Q2

Q3

Q4

Q1

/07

Q2

Q3

Q4

Q1

/08

Q2

Q3

Q4

Q1

/09

Q2

Q3

Q4

Q1

/10

Q2

Q3

Q4

Q1

/11

Q2


Investments in Industry, 2002 -2011Net balance

F

Source: Survey of Expectations in Industry, Apr. 2011, M.A.I Economic Research Department (186 industrial companies )

A Rapid Growth in Israel Compared to most developed countries

70 The Manufacturers' Association of Israel

Source: IMF, April 2011

-5%

-3%

-1%

2%

4%

6%

8%

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Me

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Tu

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Ko

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Sw

ed

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Po

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Fin

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Au

str

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a

No

rwa

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US

A

Ca

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Ge

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ny

Sw

itze

rla

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Cze

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Re

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ark

Au

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Fra

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the

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Ja

pa

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Slo

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5.9%

4.6%

3.7%

2.8% 2.5%

1.7%1.4%

-1.5%

-3.5%

Real GDP Growth, 2011 Forecast

Thank you

Daphna Aviram-NitzanHead of Economic Research Department

Manufacturers' Association of Israel

[email protected] Tel. 972-3-5198806 Mobile: 972-50-7478111

May 24 th 2011 The Israeli Economy. GDP ($Billion) 218 Population (3/2011, Million) 7.7 GDP per...

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Transcript of May 24 th 2011 The Israeli Economy. GDP ($Billion) 218 Population (3/2011, Million) 7.7 GDP per...