Everything About Israel’s Economy

Everything About Israel’s Economy

According to Iran Gate, despite various political and economic crises, Israel’s per capita income is more than double that of Arab countries in the Middle East. The country’s economic growth in 2022 reached 65%, which is considered one of the highest growth rates in the world. In other words, it can be said that the residents of the occupied territories enjoy the highest level of citizen welfare in the Middle East.

Many believe that after Hamas’s attack on the occupied territories on October 7, 2023, Israel’s economy will not see prosperity again. But is such a claim true? Israel has one of the most stable and developed economies in West Asia, especially the Middle East, and its entry into a serious crisis is beyond the imagination of any economist.

Although some still believe that the uncertainty and sense of insecurity created in Israel will affect its economy and make things more difficult for Israeli statesmen, before making any judgments about the future of Israel’s economy, one must know its specifics and understand the dimensions of this country’s economy. This report examines Israel’s economic situation and the living conditions of its citizens.

Israel: The Most Developed Economy in the Middle East

Israel’s economy, considered one of the most developed and prosperous in the world, is based on free-market principles, with government intervention rates much lower than other Middle Eastern countries. However, traces of Keynesian policies can also be observed in Israel’s economy, rooted in the unique situation the country faces in the region. Hence, the Israeli government sometimes acts as a welfare state, implementing interventions such as taxation and spending in the public interest.

It should not be forgotten that the development of this 9.5 million unified Jewish population in the Middle East has largely served to strengthen the country’s security foundations. It should not be forgotten that Israel is the only nuclear power in the Middle East and has one of the most equipped and largest armies in the world.

Relying on these points, Benjamin Netanyahu recently referred to Israel as one of the scientific references in the field of artificial intelligence at the United Nations General Assembly, as the largest startups active in this field are located in Israel and are engaged in extensive activities in electronics, military, medical, and agricultural industries.

Gross Domestic Product (GDP)

Gross Domestic Product, or GDP as known in economic literature, is one of the most important indicators for assessing the economic status of countries. Israel, as one of the most developed economies in the world, is no exception to this rule. The World Bank estimates Israel’s GDP for 2023 to be about $560 billion, while in 2022, the GDP recorded for Israel’s economy was over $530 billion.

Israel’s GDP per capita in 2022 was recorded at over $57,000 per Israeli citizen. The country’s economic growth in 2021 was over 85%, but in 2022, due to reasons such as the intensification of global inflation and the Ukraine war, it experienced a 2% retreat, recording a figure of 65%. It should not be forgotten that minor and major political crises were also among the main reasons for the decline in the extraordinary economic growth trend in 2022.

However, experts estimate that Israel’s economic growth in the current year will surpass 74%, indicating an acceleration compared to 2022. However, given the attack by Hamas militants on the occupied territories in southern Palestine near the Gaza border, it is expected that this trend may slightly decrease. But what has been achieved so far indicates a significant increase in Israel’s economic growth rate.

The growth rate in various sectors of Israel’s economy, including industry, services, and agriculture in 2022, was recorded at 265%, 69%, and 3%, respectively. These statistics indicate the remarkable activity of knowledge-based companies and successful multinational startups in the country. As mentioned, more than two-thirds of Israel’s economy is accounted for by the services sector, which has led to the country being recognized as one of the main references in this field in the region and even globally.

Inflation and Unemployment

The COVID-19 pandemic from 2018 to 2021 caused even the largest and most developed economies in the world to enter a severe crisis phase. As a result, we witnessed widespread inflation in the core of major world economies in 2020 and 2021. Israel was among these countries but managed to quickly escape the global economic inflation crisis by adopting correct monetary policies.

The inflation rate in Israel in the first half of 2023 was about 4%, which, compared to the average inflation over the 20-year period from 2000 to 2020, has grown by about 22%. However, these numbers should be examined considering the double-digit inflation rate in the United States in 2022 and the high inflation rates of global economic powers, which have been unprecedented in about 30 years.

The unemployment rate in 2022 was about 3.6%. Israel’s Ministry of Labor recently reported about 138,000 unemployed in this country with a population of 9.5 million. However, the unemployment rate among young people was about double, with about 6% of Israel’s young workforce being unemployed at the end of 2022.

It should not be overlooked that Israel has one of the lowest unemployment rates worldwide and has one of the most fertile labor markets among West Asian and Eastern European countries. This is while the COVID-19 pandemic exacerbated unemployment, especially among young Israelis, and we witnessed higher numbers than the records of previous decades in Israel’s labor market, where 60% of the country’s 5.4 million population is employed.

Per Capita Income and Livelihood

As stated at the beginning of the report, Israel carries the title of the most developed economy in the Middle East. According to recorded statistics in 2022, the per capita income of citizens in the occupied territories was about $38,000. This has led Israelis to experience one of the highest levels of welfare compared to citizens of other countries in the region.

According to a report published by the International Labour Organization (ILO) in 2020, about 9% of the residents of the occupied territories are considered poor, with about 25% facing absolute poverty, mainly among Arabic-speaking Israeli citizens. This is while the average poverty line in the Middle East exceeds 27%, which is not comparable to what is happening in Israel.

The average income in Israel compared to 16 Arab countries shows a nearly 100% gap. The average monthly income in the 16 Arab countries of the region was recorded at about $1,200 in 2022, while the same metric for Israeli citizens was over $2,500 per month during the same period. The per capita GDP of Arab Middle Eastern countries in 2022 was about half of Israel’s.

Oil: Israel’s Weakness or Strength

All these figures indicate a deep gap between Israel’s economy and other countries in the region. It should be noted that except for countries like Lebanon, Syria, and Yemen, other Arab countries in the Middle East enjoy favorable economic conditions. Economic indicators also show sustainable prosperity in these countries, including Saudi Arabia, Qatar, the United Arab Emirates, and even Egypt. However, the point is that Israel’s economy is categorized among the world’s developed economies due to various reasons, including its dynamic and vibrant nature.

However, the mentioned Arab countries, without exception, rely entirely on oil money and are therefore not recognized as developed economies. This is why many economists believe that Israel’s lack of oil resources in the occupied Palestinian territories has created an extraordinary opportunity for the country to move towards a dynamic and vibrant economy.

It should not be forgotten that Israel’s economy is the only one in the region that possesses all the factors of a free economy. Additionally, experts refer to Israel as the only democracy in the Middle East. All these factors have combined to make Israel the most developed economy in the economic sphere among the countries of West Asia and North Africa.