​Summary:

  • The GDP growth rate in 2010 was higher than the average for the developed economies, and also above that of the previous two years—continuing the trend of emergence from the economic crisis which began in 2009:Q2. Towards the end of 2010 the economy approached full employment, with a significant reduction in the unemployment rate.
  • The expansion of economic activity in 2010 reflects the rise in global and domestic demand, and was supported by expansionary monetary policy and slightly expansionary fiscal policy.
  • Israel’s economic growth stemmed from a marked increase in both exports and domestic uses, and in private consumption in particular.
  • An outstanding development in 2010 was the real local-currency appreciation, reflecting not only long-term factors, among them the ongoing surplus on the current account, but also short-term ones, such as the marked expansion of capital inflow.
  • The rise in business-sector output was reflected primarily in measured total productivity, incorporating a cyclical element, but also an increase of slightly more than 2.5 percent in factor inputs—capital and labor.
  • In the second half of 2010 the expansion of exports moderated, but the continued rise in domestic uses enabled GDP to grow at an even higher rate than in the first half of the year.
  • Manufacturing output rose considerably, due to the continued recovery in foreign and domestic demand and despite the decline in the profitability of exports. The expansion of activity in this industry was based on an increase in the utilization of physical capital, while the increase in factor units (physical capital and labor) was modest.
  • In response to the continued rise in house prices, there was a surge in the activity of the construction industry in 2010, especially for residential purposes, and the rise in the output of this industry exceeded the average of the business sector, in contrast with the trend of the last decade. The surge was accompanied by a marked increase in the number of persons employed—most of them Israelis—accounting for about one quarter of incremental employment in the business sector. Thus, this industry became an important channel by which the policy adopted since the crisis for stimulating economic activity was expressed.
  • The product of the commerce and services industry rose rapidly, as did its labor inputs. The real wage rose moderately in 2010, in contrast with its decline in 2009.
  • There are clear-cut economic benefits to having an extensive and efficient public transport system in the metropolitan area. In the last few years, however, because of the competition from private vehicles, its use has declined in intensity. The expansion of this industry involves huge investment in a mass transportation system in the three major cities, the allocation of public transport lanes, and a change in institutional structure enabling better integration between the various aspects of the public transport system.