Following World War II, Britain withdrew from its mandate of Palestine, and the UN proposed partitioning the area into Arab and Jewish states, an arrangement rejected by the Arabs. Nonetheless, an Israeli state was declared in 1948, and Israel subsequently defeated the Arab armies in a series of wars that did not end deep tensions between the two sides. (The territories Israel has occupied since the 1967 war are not included in the Israel country profile, unless otherwise noted.) On 25 April 1982, Israel withdrew from the Sinai Peninsula pursuant to the 1979 Israel-Egypt Peace Treaty. In keeping with the framework established at the Madrid Conference in October 1991, Israel conducted bilateral negotiations with Palestinian representatives and Syria to achieve a permanent settlement with each. Israel and Palestinian officials on 13 September 1993 signed a Declaration of Principles (also known as the "Oslo Accords"), enshrining the idea of a two-state solution to their conflict and guiding an interim period of Palestinian self-rule. The parties achieved six additional significant interim agreements between 1994 and 1999 aimed at creating the conditions for a two-state solution, but most were never fully realized. Outstanding territorial and other disputes with Jordan were resolved in the 26 October 1994 Israel-Jordan Peace Treaty.
Middle East, bordering the Mediterranean Sea, between Egypt and Lebanon
timber, potash, copper ore, natural gas, phosphate rock, magnesium bromide, clays, sand
Population - distribution
population concentrated in and around Tel-Aviv, as well as around the Sea of Galilee; the south remains sparsely populated with the exception of the shore of the Gulf of Aqaba
Hebrew (official), Arabic (used officially for Arab minority), English (most commonly used foreign language)
Tel Aviv-Yafo 3.608 million; Haifa 1.097 million; JERUSALEM (proclaimed capital) 839,000 (2015)
- Conventional long form
- State of Israel
- Conventional short form
- Local long form
- Medinat Yisra'el
- Local short form
- Geographic coordinates
- 31 46 N, 35 14 E
- Time difference
- UTC+2 (7 hours ahead of Washington, DC, during Standard Time)
- Daylight saving time
- +1hr, Friday before the last Sunday in March; ends the last Sunday in October
has not submitted an ICJ jurisdiction declaration; withdrew acceptance of International Criminal Court jurisdiction in 2002
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.
- Total tax rate (% of commercial profits)
- Real Interest Rate
- Manufacturing, value added (% of GDP)
- Current Account Balance
- US$ 12,260,100,000
- Labor Force, Total
- Employment in Agriculture
- Employment in Industry
- Employment in Services
- Unemployment Rate
- Imports of goods and services
- US$ 87,739,155,340
- Exports of goods and services
- US$ 95,028,641,358
- Total Merchandise Trade
- FDI, net inflows
- US$ 12,323,700,000
- Commercial Service Exports
- US$ 39,232,600,000
citrus, vegetables, cotton; beef, poultry, dairy products
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
- machinery and equipment, software, cut diamonds, agricultural products, chemicals, textiles and apparel
- US 27.5%, Hong Kong 8%, UK 6.1%, China 4.9% (2015)
- raw materials, military equipment, investment goods, rough diamonds, fuels, grain, consumer goods
- US 13%, China 9.3%, Switzerland 7.1%, Germany 6.1%, Belgium 5.3%, Italy 4% (2015)
- Country Risk Rating
- The political and economic situation is good. A basically stable and efficient business environment nonetheless leaves room for improvement. Corporate default probability is low on average.
- Business Climate Rating
- The business environment is good. When available, corporate financial information is reliable. Debt collection is reasonably efficient. Institutions generally perform efficiently. Intercompany transactions usually run smoothly in the relatively stable environment rated A2.
- Industry dominated by high-tech products
- Highly skilled workforce
- Political and financial support from the U.S. and the diaspora
- Natural gas production since mid-2013 from large offshore reserves
- Political fragmentation and weak coalition governments
- Stalemate in Israeli-Palestinian negotiations persists
- Relatively high public debt
The slight increase in activity seen in 2016 is likely to continue in 2017. It is mainly being driven by private consumption, representing around 60% of GDP, in a buoyant dynamic: household demand is likely to rise thanks to lower unemployment, the increase in the participation rate and a raise of the minimum wage, which is expected to continue until the end of 2017. The contribution from exports will remain moderate in 2017 given the sluggish growth outlooks for the United States and the Eurozone, weak global demand for diamonds, as well as upwards pressures on the shekel which reduces the competitiveness of Israeli exports. Investment, accounting for 19% of Israel’s GDP, is showing signs of recovery, particularly in capital goods.
The negative inflation recorded in 2016 was a result of external factors and in particular the fall in oil prices. The upturn in activity in 2017 and the expected gradual rise in oil prices will lead to a slow rise in the general level of prices, which should shift back in the black.
The budget deficit is likely to widen in 2017, mainly because of increased public spending in areas such as housing, healthcare and transport. The coalition government plans on addressing the issue of inequality with an increase in social spending. Security expenditures will remain high in 2017. Tax revenues could fall slightly as a result of the tax cuts planned by the government. It plans on implementing small reductions in income taxes in order to boost consumption and will cut corporate tax by two percentage points (24% in 2017, 23% in 2018) to encourage new investment, especially in the high technology sector. The expected increase in growth should partially offset these tax cuts. Despite a relatively high level of debt, the sovereign risk remains limited for Israel which should be able to continue borrowing at low rates on the domestic and international markets.
The current account surplus is expected to reduce further in 2017 from its peak in 2015. As in 2016, the rise in oil prices is going to increase the import bill in 2017. On top of this, the positive outlooks for consumption and investment in 2017 will also lead to increased imports. Any increase in exports will not be large enough to prevent a deterioration in the balance of trade in goods. However, the balance of trade in services and net transfers will continue to keep the current account balance in the black.
The early parliamentary elections won by Likud in March 2015 led to the formation of a new government on the right which re-elected Benyamin Netanyahou Prime Minister. The coalition, based on an agreement between Likud, the Jewish Home, the centre-right Kulanu and the United Torah Judaism (Ashkenazi) and Shas (Sephardic) parties, was strengthen in May 2016 by an agreement signed with Yisrael Beiteinou. From its initial majority of one seat in the Knesset, the coalition increased its majority by five seats. In addition to a shift to the right, the agreement also represents a renewal of divisions within the majority, namely between the religious and the secular elements.
The new regulatory context for the gas sector approved, by a relative consensus, in May 2016 has allowed the removal of the internal obstacles to the development of the Leviathan gas field off the Israeli coast. Production is expected to start in 2019–2020. As with the first gas export contract signed with Jordan in September 2016, these gas resources could enable the development of new strategic links within the region, in particular with Turkey.
Furthermore, the election of Donald Trump is expected to lead to an improvement in US-Israeli relations which have deteriorated significantly, most particularly following the signing of the agreement on the Iranian nuclear program. The Trump Administration, which will be less involved in Israeli-Palestinian affairs than its predecessor, is not expected to relaunch the peace process that has been at a standstill for several years now and which now seem likely to be frozen until at least the next Israeli parliamentary elections in 2019. In this context, the danger of a further escalation in the level of violence the country has been experiencing since October 2015 cannot be ruled out.
The civil war in Syria is creating serious security risks for Israel, with the danger of externalities targeting the country, in the form of terrorist attacks.