Israeli economy defies economic meltdown at 65
While most of the world is afflicted by an economic meltdown, the Israeli economy appears to be bucking the trend.
By many accounts, the country is demonstrating fiscal responsibility, sustained growth with no stimulus package, and a conservative, well-regulated banking system with no banking or real estate bubble.
At 65, Israel’s credit rating is sustained by the three leading global credit rating companies: Standard and Poor’s (S&P), Moody’s and Fitch Ratings. Moreover, the International Monetary Fund commended the performance of the Israeli economy and has expressed confidence in its long-term viability.
United Bank of Switzerland (UBS) Chairman Kasper Villiger indicated that China, Hong Kong, Brazil, Russia and Israel are the future growth engines for UBS. Deloitte Touche, one of the top four global CPA firms, opined that Israel is the fourth-most attractive site for overseas investors. The Swiss-based Institute for Management Development ranks the Bank of Israel among the top five central banks in its 2012 World Competitiveness Yearbook for the third year in a row.
At 65, Israel’s economic indicators are among the world’s best. For example, during the 2009-2012 global economic crisis Israel experienced a 14.7 percent growth of gross domestic product, the highest among Organization for Economic Co-operation and Development (OECD) countries. Its 2012 GDP growth (3.3 percent) led the OECD, which averaged 1.4 percent. Its 2012 GDP of $250 billion catapulted to 120 times that of 1948. A $1,132-per capita GDP in 1962 surged to $32,000 in 2012. Israel managed to reduce its debt/GDP ratio from 100 percent in 2002 to 74 percent in 2012, while most of the world experiences a soaring ratio. A 450-percent galloping inflation in 1984 has been held in check in recent years — 1.6 percent in 2012. Israel’s 2012 budget deficit and unemployment were 4.2 percent and 6.9 percent, respectively, much lower than the OECD average of 7 percent and 8 percent.
Foreign exchange reserves — which are critical to sustaining global confidence in Israel’s economy and Israel’s capabilities during emergencies — expanded from $25 billion in 2004 to $75 billion in 2012, 26th in the world and one of the top per capita countries.
At 65, Israel’s robust demography — which leads the free world with three births per Jewish woman — provides a tailwind for the Israeli economy.
At 65, Israel attracts the elite of global high-tech due to its competitive edge. For instance, the prestigious Shanghai Jiaotong University’s Academic Ranking of World Universities includes four Israeli universities among the top thirty computer science universities in the world. Twenty universities are from the United States, four from Israel, two each from Canada and the Great Britain, and one each from Switzerland and Hong Kong.
At 65, Israel leads the world in its research and development manpower per capita. With 140 Israelis per 10,000 as opposed to 85 per 10,000 in the United States, Israel is ahead of the rest of the world. Israel’s qualitative workforce benefits from the annual aliya (immigration of Jews to Israel) of skilled persons from the former Soviet Union, Europe, the U.S., Latin America and Australia, who join graduates from Israeli institutions of higher learning. In addition, Israel’s high-tech industry absorbs veterans of the elite high-tech units of the Israel Defense Forces. Israel dedicates 4.5 percent of its GDP to research and development, the highest proportion in the world.
Israel’s confronting of unique security and economic challenges has produced unique, innovative and cutting-edge solutions, technologies and production lines, which have attracted global giants. For example, Google’s Executive Chairman Eric Schmidt considers Israel “the most important high-tech center in the world after the U.S.” He has invested in Israel’s high-tech industry via his own private venture capital fund, Innovation Endeavors.
According to world-renowned investor Warren Buffet, “If you’re looking for brains, [Israel] has a disproportionate amount of brains and energy.” In 2006, Buffett’s Berkshire Hathaway made its first-ever acquisition outside the U.S. in Israel, acquiring 80 percent of Israel’s Iscar for $4 billion.
(Yoram Ettinger is a former ambassador and head of Second Thought: a U.S.-Israel initiative.)