Emerging Markets / April 30, 2018

Macroeconomics and Policy in the State of Israel

On May 14, the United States is expected to inaugurate its new embassy in Jerusalem, where all three branches of the Israeli government have been located since the 1950s. A historic move announced last year by President Trump, the United States will now recognize the divided city of Jerusalem as Israel’s capital over the city Tel Aviv, which is where most western countries keep their diplomatic representations.

Macroeconomics and Policy in the State of Israel

The State of Israel is a parliamentary democracy located along the Mediterranean coast of the Middle East, between Lebanon and Egypt. With a total territory of 20.770 square kilometers, Israel is somewhat larger than New Jersey. Geographically, Israel consists of the Negev desert to the south, the Jordan Rift valley, coastal plains along the west, and a mountainous interior. Furthermore, Israel has 273 kilometers of coastline and temperate Mediterranean climate, with dry desert areas. Currently, Israel has a total population of approximately 8.3 million citizens with an average age of 30 years. Likewise, about 92% of the Israeli population lives in an urban setting, notably the city of Tel Aviv-Yafo with its 3.6 million inhabitants. In economic terms, the country has a Gross Domestic Product (GDP) of almost US$317 billion (PPP), which is divided into approximately 3% agriculture, 27% manufacturing, and 70% services. Simultaneously, Israel has experienced economic growth over 2.5% throughout the last three years. Moreover, it is estimated that the agricultural industry employs 1% of the national labor force, while manufacturing employs 18% and services employ another 81%. Furthermore, in Israel, the agriculture industry utilizes 24% of the national territory, while another 7% is forested.

In terms of trade, Israel is the forty-second largest export economy in the world and has numerous free trade agreements (FTAs), including with the United States. During 2015, the country imported US$59.9 billion worth of goods and exported US$65.4 billion, resulting in a trade surplus of US$5.4 billion. Moreover, Israel’s main export, representing 23% or US$14.8 billion of the country’s total in 2015, were diamonds. Similarly, the country’s main import that same year, representing 11% or US$6.7 billion of all international purchases, were also diamonds. Meanwhile, Israel’s main trading partners are the United States, China, the European Union, and the Palestinian territories.

In recent years, the average per capita protein intake of animal origin amongst the Israeli population has been 71 grams daily. Meanwhile, land distribution and productivity in the country have evolved throughout the last half century. Back in 1961, permanent pastures and meadows in Israel covered 114.000 hectares, while arable land covered 318.000 hectares and permanent crops accounted for 79.000 hectares. More recently, in 2015, permanent pastures and meadows had increased to account for 140.000 hectares, while arable land represented 297.200 hectares and permanent crops covered approximately 96.700 hectares. Lastly, in 1961, the cereals market in Israel utilized 154.875 hectares of land and yielded some 171.600 metric tons annually. Meanwhile, in 2016, the country devoted 61.451 hectares of land to cereals production and yielded approximately 305.382 metric tons.

(Read more about Agribusiness and Trade in Panama’s Economy)