Summary:

  • GDP increased in 2009 at a modest 0.7 percent pace due to the global economic crisis, which was at its most severe early in the year and Israel's GDP was less badly affected than that of the OECD countries.  
  • From mid-year on, the economy began to recover gradually in tandem with developments abroad, thanks to good fundamentals and an expansionary monetary policy.  
  • In Israel, much as in developed countries at large, the crisis took a heavy toll on exports and nonresidential investment. Current private consumption and construction investment continued to grow moderately, evidently due to lower leveraging of Israeli households and the stability of the financial system and the housing market.  
  • Total uses fell considerably, at a pace resembling that abroad. Since most of the decrease occurred in import-intensive uses, imports decreased steeply while GDP was less badly affected.  
  • Israel's terms of trade improved appreciably due to a steep decrease in the prices of imported inputs.  
  • The economic crisis had a swift and perceptible effect on domestic employment and wages while productivity remained strong-in contrast to the gradual response that the labor market typically exhibited in the past.  
  • The rate of foreign direct investment in total domestic investment has been around 20 percent on average since 2000 with an upward trend in recent years-a strong performance by the standards of emerging markets and developed countries alike.  
  • Manufacturing was the main casualty of the crisis due to the precipitous decrease in global demand for goods, especially given the high share of exports in domestic manufacturing activity.  
  • Construction product decreased by only one percent, in a display of stability relative to other industries. Thus, it contributed to the stability of total economic activity despite early fears of a credit crunch induced by the current crisis.  
  • Commerce and services were moderately affected in 2009, largely because the ravages of the crisis in these fields had already been manifested in 2008. The transport industry took a relatively severe beating whereas the communications industry continued to grow.  
  • An international comparison shows that it is best to earmark a larger share of the budget to public transport in metropolitan areas at the expense of road investment. An investment in developing a public-transit system in the Tel Aviv area should be made. In other countries, relatively small towns are rarely linked by rail. However, the development of an interurban road system and an interurban rail system has positive externalities.  
     
     GDP, Uses and Principal Industries - Full File