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Introduction

"He who tills the land shall be satisfied with bread..."  (Proverbs 12:11)

Israel ranks 15th worldwide in the Global Competitiveness Index (GCI)

This year, Israel ranks 15th worldwide in the World Economic Forum’s Global Competitiveness Index (GCI), up from 23 last year, making it one of the world’s most competitive economies.

Its most significant achievements were concentrated in the areas of technological readiness (up 20 places to rank 3), macroeconomic management (up 17 places to rank 50), market efficiency (up seven places to rank 14), and various areas of infrastructure.

Spurred by the global upswing and a concurrent increase in world trade, a recovery of the high-tech sector and an improved internal security situation, the Israeli economy has been improving since 2003, witnessed by an impressive GDP growth rate of 5.2 percent in 2005 (4.3 percent in 2004) and forecasts of growth for 2006 of more than 5 percent, made before the August 2006 hostilities broke out.

The global economic recovery resulted in a sharp upturn in demand for high-tech production which constitutes some 70 percent of Israel’s industrial exports, the highest percentage in the world. In 2005, high-tech exports rose by nearly 10 percent, to US$18.8billion. Israel also benefited from the rise of the high-tech sectors in India and China and their emergence as increasingly important customers of its products.

The country’s general government expenditure-to-GDP ratio which has been traditionally high (47.3 percent in 2005, compared to the OECD average of 41.8 percent, due to huge defense spending and substantial interest payments on the debt stock) was significantly reduced in early 2006.

The budget deficit still remains on the high side compared to other western countries reflected in a rank of 71. But there were signs of improvement, as shown in its jump upwards by 22 ranks over last year

The area that saw the most impressive development was the financial market, highly developed by regional and international standards, as reflected by the country’s 13th place under this category.

Israel ranked 23rd for overall infrastructure quality, up seven places since lat year and 31st for railroad infrastructure development, reflecting a jump of ten places. These improvements reflect ongoing reforms in rail, roads, ports, and electricity supply infrastructure.

The economic impact of the recent hostilities has been limited. The effects of the these on real activity, on the exchange rate, inflation, and on financial markets has been small and has demonstrated Israel’s continued economic. In the longer term, much will be gained from lasting security arrangements, removing uncertainties about the political environment and allowing a redirection of resource toward productivity-enhancing areas, such as education and infrastructure. 

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