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Israel vs. Gaza Strip

Economy

IsraelGaza Strip
Economy - overview

Israel has a technologically advanced free market economy. Cut diamonds, high-technology equipment, and pharmaceuticals are among its leading exports. Its major imports include crude oil, grains, raw materials, and military equipment. Israel usually posts sizable trade deficits, which are offset by tourism and other service exports, as well as significant foreign investment inflows.

Between 2004 and 2013, growth averaged nearly 5% per year, led by exports. The global financial crisis of 2008-09 spurred a brief recession in Israel, but the country entered the crisis with solid fundamentals, following years of prudent fiscal policy and a resilient banking sector. Israel's economy also weathered the 2011 Arab Spring because strong trade ties outside the Middle East insulated the economy from spillover effects.

Slowing domestic and international demand and decreased investment resulting from Israel’s uncertain security situation reduced GDP growth to an average of roughly 2.8% per year during the period 2014-17. Natural gas fields discovered off Israel's coast since 2009 have brightened Israel's energy security outlook. The Tamar and Leviathan fields were some of the world's largest offshore natural gas finds in the last decade. Political and regulatory issues have delayed the development of the massive Leviathan field, but production from Tamar provided a 0.8% boost to Israel's GDP in 2013 and a 0.3% boost in 2014. One of the most carbon intense OECD countries, Israel generates about 57% of its power from coal and only 2.6% from renewable sources.

Income inequality and high housing and commodity prices continue to be a concern for many Israelis. Israel's income inequality and poverty rates are among the highest of OECD countries, and there is a broad perception among the public that a small number of "tycoons" have a cartel-like grip over the major parts of the economy. Government officials have called for reforms to boost the housing supply and to increase competition in the banking sector to address these public grievances. Despite calls for reforms, the restricted housing supply continues to impact younger Israelis seeking to purchase homes. Tariffs and non-tariff barriers, coupled with guaranteed prices and customs tariffs for farmers kept food prices high in 2016. Private consumption is expected to drive growth through 2018, with consumers benefitting from low inflation and a strong currency.

In the long term, Israel faces structural issues including low labor participation rates for its fastest growing social segments - the ultraorthodox and Arab-Israeli communities. Also, Israel's progressive, globally competitive, knowledge-based technology sector employs only about 8% of the workforce, with the rest mostly employed in manufacturing and services - sectors which face downward wage pressures from global competition. Expenditures on educational institutions remain low compared to most other OECD countries with similar GDP per capita.

Movement and access restrictions, violent attacks, and the slow pace of post-conflict reconstruction continue to degrade economic conditions in the Gaza Strip, the smaller of the two areas comprising the Palestinian territories. Israeli controls became more restrictive after HAMAS seized control of the territory in June 2007. Under Hamas control, Gaza has suffered from rising unemployment, elevated poverty rates, and a sharp contraction of the private sector, which had relied primarily on export markets.

Since April 2017, the Palestinian Authority has reduced payments for electricity supplied to Gaza and cut salaries for its employees there, exacerbating poor economic conditions. Since 2014, Egypt’s crackdown on the Gaza Strip’s extensive tunnel-based smuggling network has exacerbated fuel, construction material, and consumer goods shortages in the territory. Donor support for reconstruction following the 51-day conflict in 2014 between Israel and HAMAS and other Gaza-based militant groups has fallen short of post-conflict needs.

GDP (purchasing power parity)
$317.1 billion (2017 est.)
$307 billion (2016 est.)
$295.3 billion (2015 est.)

note: data are in 2017 dollars

see entry for the West Bank

GDP - real growth rate
3.3% (2017 est.)
4% (2016 est.)
2.6% (2015 est.)
-15.2% (2014 est.)
5.6% (2013 est.)
7% (2012 est.)

note: excludes the West Bank

GDP - per capita (PPP)
$36,400 (2017 est.)
$35,900 (2016 est.)
$35,200 (2015 est.)

note: data are in 2017 dollars

see entry for the the West Bank

GDP - composition by sector
agriculture: 2.4% (2017 est.)
industry: 26.5% (2017 est.)
services: 69.5% (2017 est.)
agriculture: 3% (2017 est.)
industry: 21.1% (2017 est.)
services: 75% (2017 est.)

note: data exclude the West Bank

Population below poverty line
22% (2014 est.) (2014 est.)

note: Israel's poverty line is $7.30 per person per day

30% (2011 est.)

note: data exclude the West Bank

Inflation rate (consumer prices)
0.2% (2017 est.)
-0.5% (2016 est.)
0.2% (2017 est.)
-0.2% (2016 est.)

note: excludes the West Bank

Labor force
4.021 million (2017 est.)
1.24 million (2017 est.)

note: excludes the West Bank

Labor force - by occupation
agriculture: 1.1%
industry: 17.3%
services: 81.6% (2015 est.)
agriculture: 5.2%
industry: 10%
services: 84.8% (2015 est.)

note: data exclude the West Bank

Unemployment rate
4.2% (2017 est.)
4.8% (2016 est.)
27.9% (2017 est.)
27% (2016 est.)

note: data exclude the West Bank

Budget
revenues: 93.11 billion (2017 est.)
expenditures: 100.2 billion (2017 est.)
see entry for the West Bank
Industries
high-technology products (including aviation, communications, computer-aided design and manufactures, medical electronics, fiber optics), wood and paper products, potash and phosphates, food, beverages, and tobacco, caustic soda, cement, pharmaceuticals, construction, metal products, chemical products, plastics, cut diamonds, textiles, footwear
textiles, food processing, furniture
Industrial production growth rate
3.5% (2017 est.)
2.2% (2017 est.)

note: see entry for the West Bank

Agriculture - products
citrus, vegetables, cotton; beef, poultry, dairy products
olives, fruit, vegetables, flowers; beef, dairy products
Exports
$58.67 billion (2017 est.)
$56.17 billion (2016 est.)
$1.955 billion (2017 est.)
$1.827 billion (2016 est.)
Exports - commodities
machinery and equipment, software, cut diamonds, agricultural products, chemicals, textiles and apparel
strawberries, carnations, vegetables, fish (small and irregular shipments, as permitted to transit the Israeli-controlled Kerem Shalom crossing)
Imports
$68.61 billion (2017 est.)
$63.9 billion (2016 est.)
$8.59 billion (2018 est.)
$7.852 billion (2017 est.)

see entry for the West Bank

Imports - commodities
raw materials, military equipment, investment goods, rough diamonds, fuels, grain, consumer goods
food, consumer goods, fuel
Debt - external
$88.66 billion (31 December 2017 est.)
$87.96 billion (31 December 2016 est.)

see entry for the West Bank

Exchange rates
new Israeli shekels (ILS) per US dollar -
3.606 (2017 est.)
3.8406 (2016 est.)
3.8406 (2015 est.)
3.8869 (2014 est.)
3.5779 (2013 est.)

see entry for the West Bank

Fiscal year
calendar year
calendar year
Reserves of foreign exchange and gold
$113 billion (31 December 2017 est.)
$95.45 billion (31 December 2016 est.)
$446.3 million (31 December 2017 est.)
$583 million (31 December 2015 est.)
Current Account Balance
$10.12 billion (2017 est.)
$11.94 billion (2016 est.)
-$1.444 billion (2017 est.)
-$1.348 billion (2016 est.)

note: excludes the West Bank

GDP (official exchange rate)
$350.7 billion (2017 est.)
$2.938 billion (2014 est.) (2014 est.)

note: excludes the West Bank

Commercial bank prime lending rate
3.5% (31 December 2017 est.)
3.42% (31 December 2016 est.)

see entry for the West Bank

Stock of domestic credit
$290.7 billion (31 December 2017 est.)
$257.4 billion (31 December 2016 est.)
$2.041 billion (31 December 2017 est.)
$1.712 billion (31 December 2016 est.)
Stock of narrow money
$100.4 billion (31 December 2017 est.)
$79.58 billion (31 December 2016 est.)

see entry for the West Bank

Stock of broad money
$100.4 billion (31 December 2017 est.)
$79.58 billion (31 December 2016 est.)
$2.901 billion (31 December 2017 est.)
$2.538 billion (31 December 2016 est.)
Unemployment, youth ages 15-24
total: 7.3%
male: 6.7%
female: 7.8% (2017 est.)
total: 46.9%
male: 40.5%
female: 75.3% (2018 est.)

note: includes the West Bank

GDP - composition, by end use
household consumption: 55.1% (2017 est.)
government consumption: 22.8% (2017 est.)
investment in fixed capital: 20.1% (2017 est.)
investment in inventories: 0.7% (2017 est.)
exports of goods and services: 28.9% (2017 est.)
imports of goods and services: -27.5% (2017 est.)
household consumption: 88.6% (2017 est.)
government consumption: 26.3% (2017 est.)
investment in fixed capital: 22.4% (2017 est.)
investment in inventories: 0% (2017 est.)
exports of goods and services: 18.6% (2017 est.)
imports of goods and services: -55.6% (2017 est.)

note: data exclude the West Bank

Source: CIA Factbook