ECONOMY OF ISRAEL


Israel attained the highest Gross Domestic Product (GDP) growth rate among Western (OECD) economies in 1991 (6.2%) and 1992 (6.7%) and one of the highest in 1993 (3.5%). Its per capita GDP, today exceeding $12,300 ($=US dollar), places it 21st among 200 countries in the world. Although a small country (population - 5.3 million), Israel's international position in some areas of industrial and agricultural production capacity and exports is remarkable. Free Trade Agreements with Europe (the EU and EFTA) and the US facilitate Israel's exports and participation in international business enterprises, thus exercising its accelerated growth during the 1990s.

Israel's Economy Graphic Israel's most striking economic achievement is the rate at which it has developed while simultaneously dealing with a number of major challenges :

-Maintaining national security : Israel now spends 10-15 percent (as against over 25 percent in the 1970s)
of its GDP on defense (compared to 3-5 percent in most Western countries).

- Absorbing large numbers of immigrants : The "ingathering of the exiles" is the raison d'etre of the Jewish state.
Since its inception, Israel has absorbed 2.4 million immigrants, over 3.5 times the number of Jews living in the country when it attained independence (1948). In its first four years alone, Israel's population more than doubled as 700,000 immigrants, mostly refugees from postwar Europe and the Arab states, poured into the country. In recent years, 500,000 newcomers have arrived, mainly from the former Soviet Union, initiating acceleration of the GDP growth, although temporarily increasing unemployment to 10 percent in 1993.

- Establishing a modern economic infrastructure : Although basic networks of roads, transportation and port facilities, water, electricity and communication existed in 1948, they were inadequate and enormous outlays were required for the development of a modern economic infrastructure.

- Providing a high level of public services : Israel is committed to ensuring the well-being of its population, with special concern for the weaker elements in the society. Thus, a large percentage of its resources has always been used to meet these obligations.

For the first 25 years, the economy reached a striking average growth rate in the GNP of about 10 percent annually, while at the same time absorbing several mass immigrations, building a modern economy, fighting four wars and maintaining security. This "economic miracle" is ascribed largely to the use made of economic aid received over the years, enabling massive capital investment in means of production, and to the country's success in rapidly absorbing immigrants and involving them in productive settings.

Between 1973 and 1979 the growth rate decreased to a yearly average of 3.8 percent and, in the 1980s, it dwindled to 3.1 percent. Since 1990 it has averaged 5.4 percent. In 1993 the total GDP was close to $66 billion ($12,328 per capita), a 17-fold real increase since 1950.

Graph : GNP per capita (in $US)




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