Economy Of Israel

The economy of Israel is characterized as a highly developed free-market system, distinguished by its advanced economic infrastructure and capabilities that support a diverse and dynamic range of industries. This sophisticated economic framework has enabled Israel to sustain a prosperous society, allowing it to maintain a comprehensive welfare state that underpins social services and promotes economic stability throughout the country. Central to Israel’s national strength is its powerful modern military, which is widely believed to possess nuclear-weapons capabilities encompassing a full nuclear triad, consisting of land-based missiles, submarine-launched ballistic missiles, and air-delivered nuclear weapons. This military capacity not only serves as a strategic deterrent but also contributes indirectly to the country’s economic resilience by ensuring security in a geopolitically volatile region. Israel’s infrastructure is modern and highly developed, comparable to that of other advanced nations, facilitating efficient economic activities across various sectors. This infrastructure includes state-of-the-art transportation networks, telecommunications systems, and energy grids that support both domestic commerce and international trade. Among the most notable features of Israel’s economy is its high-technology sector, which is globally competitive and often compared to Silicon Valley in the United States due to its innovation, entrepreneurial spirit, and concentration of technology firms. Israel ranks second worldwide in the number of startup companies, trailing only the United States, although this ranking is subject to periodic updates as the startup ecosystem continues to evolve rapidly. Furthermore, Israel holds the distinction of ranking third globally in the number of companies listed on the NASDAQ stock exchange, following the United States and China, underscoring the international recognition and financial viability of its technology enterprises. The country’s high-technology prowess has attracted major American technology corporations to establish their first overseas research and development (R&D) facilities in Israel. Pioneering companies such as Intel, Microsoft, and Apple chose Israel as the site for their initial foreign R&D investments, signaling confidence in the local talent pool and innovation environment. This trend has expanded significantly, with over 400 multinational corporations—including IBM, Google, Hewlett-Packard, Cisco Systems, Facebook, and Motorola—operating R&D centers throughout Israel. These centers contribute to the development of cutting-edge technologies and foster collaboration between global firms and Israeli innovators, further enhancing the country’s economic vitality. As of 2025, the International Monetary Fund (IMF) estimated Israel’s nominal gross domestic product (GDP) to rank 25th globally, positioning it among the largest and most influential economies in the Middle East. The economy is primarily driven by two dominant sectors: high-technology and industrial manufacturing. The high-technology sector encompasses software development, cybersecurity, telecommunications, biotechnology, and other advanced fields, while industrial manufacturing includes the production of chemicals, machinery, and defense equipment. Another significant component of Israel’s economy is the diamond industry, which serves as a global hub for diamond cutting and polishing. In 2017, this industry accounted for 21% of Israel’s total exports, reflecting its vital role in the country’s trade balance and international commerce. Despite its economic strengths, Israel faces challenges related to its limited natural resources, necessitating a heavy reliance on imports for essential commodities such as petroleum, raw materials, wheat, motor vehicles, uncut diamonds, and various production inputs. This dependency on foreign supplies has historically made the economy vulnerable to external shocks and geopolitical tensions. However, recent discoveries of natural gas reserves off Israel’s Mediterranean coast have begun to reduce the country’s energy import dependence. These offshore gas fields, combined with the rapid growth of the domestic solar energy industry, are expected to enhance Israel’s energy security and contribute to a more sustainable economic future. The foundation of Israel’s high-tech boom and rapid economic development lies in its high-quality higher education system and a highly motivated, educated population. Universities and research institutions in Israel have produced a skilled workforce adept at innovation and entrepreneurship, which has been instrumental in driving technological advancement. The country has also developed a robust educational infrastructure and a sophisticated startup incubation system designed to nurture innovative ideas and facilitate the commercialization of value-added goods and services. This supportive ecosystem has led to a high concentration of high-tech companies across various regions, bolstered by a strong venture capital industry that provides the necessary financial backing for startups and emerging enterprises. Central to Israel’s high-tech landscape is the area known as “Silicon Wadi,” a term that refers to the country’s principal technology hub located primarily in the coastal plain around Tel Aviv. Silicon Wadi is considered second only to California’s Silicon Valley in terms of its importance as a global center for technology innovation and entrepreneurship. The region hosts numerous startups, established technology firms, and multinational R&D centers, creating a vibrant environment that fosters collaboration and rapid technological development. Many Israeli companies have attracted the attention of global multinationals, leading to acquisitions driven by the desire to integrate innovative technologies and leverage Israel’s reliable and skilled personnel. In its early decades, Israel’s economy was largely state-controlled and influenced by social democratic principles, with significant government involvement in key industries and a focus on social welfare. However, during the 1970s and 1980s, the country embarked on a series of free-market reforms aimed at liberalizing the economy. These reforms gradually reduced state control, encouraged private enterprise, and opened Israel to global markets. Over the past three decades, Israel’s economy has experienced significant growth, with GDP per capita increasing at a faster rate than wages, reflecting rising productivity and economic diversification. Israel is recognized as the most developed and advanced country in West Asia, possessing the 17th largest foreign-exchange reserves in the world. This financial strength supports economic stability and provides a buffer against external economic shocks. The country also boasts the highest average wealth per adult in the Middle East and ranks 10th worldwide in financial assets per capita, indicating a relatively high standard of living and wealth accumulation among its population. Additionally, Israel is the ninth largest arms exporter globally, reflecting its advanced defense industry, and it has the highest number of billionaires in the Middle East, ranking 18th worldwide, highlighting the success of its entrepreneurial and investment sectors. In recent years, Israel has achieved some of the highest GDP growth rates within the developed world, with economic expansion comparable to that of Ireland, a country known for its rapid growth and economic transformation. The Economist magazine ranked Israel as the fourth most successful economy among developed countries in 2022, underscoring its robust performance and resilience. According to the IMF, Israel’s GDP was estimated at US$564 billion in 2023, with a GDP per capita of US$58,270, placing it 13th worldwide in per capita income. These economic indicators align Israel with other highly developed nations, reflecting its advanced economic structure and high living standards. Israel’s integration into the global economy is further demonstrated by its invitation to join the Organisation for Economic Co-operation and Development (OECD) in 2010, an acknowledgment of its status as a developed economy with strong institutional frameworks. The country has also established numerous free trade agreements with major economic partners, including the European Union, the United States, the European Free Trade Association, Turkey, Mexico, Canada, Ukraine, Jordan, and Egypt. Notably, in 2007, Israel became the first non-Latin American country to sign a free trade agreement with the Mercosur trade bloc, expanding its access to South American markets and enhancing its global trade relations. These agreements have facilitated increased trade flows, investment, and economic cooperation, further embedding Israel within the international economic system.

The evolution of Israel’s economy since the mid-20th century can be traced through the trajectory of its per capita gross domestic product (GDP), which has been analyzed using inflation-adjusted figures expressed in 2011 International dollars. This long-term economic analysis reveals significant growth patterns that underscore the nation’s development from its early years to the present. The adjustment for inflation and the use of International dollars allow for a consistent comparison over time, reflecting real changes in economic output and living standards rather than nominal fluctuations. Such data provide critical insights into Israel’s economic resilience and expansion, particularly when viewed against the backdrop of its complex historical and geopolitical circumstances. The economic foundations of the Jewish population in the region were profoundly influenced by the British Mandate for Palestine, which came into effect in 1920 following the dissolution of the Ottoman Empire after World War I. Under the terms of the mandate, the British administration imposed restrictions on land purchases by Jewish immigrants, aiming to regulate demographic changes and manage tensions between Jewish and Arab communities. These land acquisition limitations significantly shaped the settlement patterns and economic activities of the Jewish population. Unable to expand agricultural holdings extensively due to these constraints, the Jewish community increasingly concentrated in urban areas, fostering a demographic profile that was more urbanized compared to the surrounding populations. This urban concentration had a direct impact on the occupational distribution within the Jewish community, with a disproportionately high number of individuals engaged in industrial and manufacturing sectors. The emphasis on industrial occupations catalyzed a distinctive economic development trajectory that diverged from the primarily agrarian economies of neighboring regions. This industrial focus laid the groundwork for what would later be recognized as one of the region’s few economic growth miracles. Unlike many contemporaneous economies in the Middle East that were heavily reliant on government-led initiatives or natural resource extraction, the Jewish economy during this period was characterized by a robust private sector. Private businessmen and entrepreneurs played a central role in driving economic activity, fostering innovation, and building industrial capacity with relatively limited direct government intervention. A seminal moment in the early industrial development of the region was the pioneering work of Moshe Novomeysky, a Russian Jewish businessman and engineer. In 1911, Novomeysky conducted the first comprehensive survey of the Dead Sea, identifying its potential as a source of valuable minerals. His efforts culminated in the establishment of Palestine Potash Ltd. in 1930, a company dedicated to the extraction and processing of potash and other minerals from the Dead Sea. This enterprise marked one of the earliest significant industrial ventures in the area and laid the foundation for what would later become the Dead Sea Works, a major industrial complex contributing substantially to the local economy. Novomeysky’s initiative exemplified the combination of technical expertise and entrepreneurial vision that characterized much of the Jewish economic activity during this era. In parallel with mineral extraction, the electrification of the region represented another critical dimension of industrial progress. In 1923, Pinhas Rutenberg, a businessman and hydraulic engineer, secured an exclusive concession from the British authorities to produce and distribute electric power throughout Palestine. This concession led to the founding of the Palestine Electric Company, which played a pivotal role in modernizing the region’s infrastructure and supporting industrial growth. The company later evolved into the Israel Electric Corporation, becoming the primary electricity supplier in the state of Israel. Rutenberg’s enterprise not only facilitated urban and industrial development but also symbolized the integration of technological innovation with economic expansion during the mandate period. The early 1920s witnessed the establishment of several large-scale factories that signaled the burgeoning industrial base of the Jewish economy. Between 1920 and 1924, key industrial entities such as the Shemen Oil Company, Societe des Grand Moulins (a major flour milling enterprise), the Palestine Silicate Company, and the Palestine Salt Company were founded. These companies represented diverse sectors, including oil refining, food processing, chemical production, and mineral extraction, reflecting a broadening economic base. The creation of such factories not only provided employment opportunities but also contributed to the import substitution efforts, reducing dependence on foreign goods and fostering self-sufficiency within the Jewish community. By 1937, the industrial sector had expanded significantly, particularly in textiles. The region boasted 86 spinning and weaving factories employing approximately 1,500 workers. This growth was underpinned by capital investments and technical expertise primarily sourced from Jewish professionals who had emigrated from Europe. These immigrants brought with them advanced industrial knowledge and skills, which were instrumental in elevating the quality and scale of production. The textile industry became a cornerstone of the Jewish economy, combining traditional craftsmanship with modern manufacturing techniques to meet both local demand and export opportunities. Among the textile enterprises, the Ata textile plant, established in 1934 in Kiryat Ata, emerged as an iconic symbol of the Israeli textile industry. Ata became renowned for its production capacity and quality, serving as a flagship factory that embodied the industrial aspirations of the Jewish community. The plant not only contributed to economic growth but also played a social role by providing employment and fostering community development in its surrounding area. Its prominence underscored the strategic importance of textiles within the broader industrial landscape of the time. The late 1930s saw further diversification of industrial activities with the establishment of the Naaman brick factory in 1939. This facility was one of the first industrial enterprises founded within a kibbutz, reflecting the integration of cooperative agricultural settlements with industrial production. The Naaman factory specialized in the manufacture of construction materials, which were in high demand due to rapid urban and infrastructural development. The factory’s output supported the building of new housing, public buildings, and infrastructure projects, facilitating the physical expansion of Jewish settlements and urban centers. The combination of industrial and communal principles in this venture illustrated the innovative approaches to economic organization characteristic of the period. World War II had a profound impact on the industrial sector in Palestine, particularly the textile industry. The disruption of European supply chains due to the war created a pressing need for locally produced goods, especially military uniforms and other textile products essential for the war effort. This interruption catalyzed rapid development within the local textile industry, as factories expanded capacity and diversified production to meet increased demand. The war years thus accelerated industrialization and technological advancement, positioning the textile sector as a critical component of the regional economy. By 1943, the expansion of the textile industry was remarkable. The number of textile factories had grown to 250, employing 5,630 workers, a nearly fourfold increase in employment compared to the pre-war period. Output from these factories increased tenfold, reflecting both the scale of production and the efficiency gains achieved during this period. This industrial boom not only contributed to economic growth but also enhanced the strategic self-sufficiency of the Jewish community in Palestine, reducing reliance on imports and strengthening the local manufacturing base. Alongside industrial growth, efforts to promote trade and economic exchange were institutionalized through the establishment of trade fairs. Beginning in 1924, Tel Aviv hosted a series of trade fairs that served as important platforms for showcasing industrial progress, facilitating commercial transactions, and fostering connections between producers, consumers, and investors. These fairs were instrumental in promoting local products, attracting foreign buyers, and stimulating economic activity. They also contributed to the cultural and social life of the community by highlighting the achievements of the burgeoning industrial sector. The inauguration of the Levant Fair in 1932 marked a significant milestone in the region’s economic development. This large-scale event expanded upon the earlier trade fairs by providing a more comprehensive venue for international trade and economic cooperation. The Levant Fair attracted exhibitors and visitors from across the Middle East and beyond, promoting regional integration and showcasing Palestine’s industrial and commercial capabilities. The fair played a vital role in positioning the Jewish economy within a broader economic context, enhancing its visibility and facilitating access to new markets. Through these trade fairs, the region demonstrated its potential as a center of economic dynamism and industrial innovation during the interwar period.

Following its declaration of independence in 1948, Israel confronted a severe economic crisis that was shaped by the dual challenges of recovering from the extensive devastation wrought by the 1948 Arab–Israeli War and managing the absorption of a massive influx of Jewish refugees. These refugees included hundreds of thousands from Europe, survivors of the Holocaust and displaced persons, as well as nearly one million Jews fleeing persecution and expulsion from Arab countries. The sudden population surge placed extraordinary demands on the nascent state’s resources, infrastructure, and social services, exacerbating the difficulties in stabilizing the economy. The war had disrupted agricultural production, destroyed infrastructure, and left the country with limited foreign currency reserves, compounding the urgency of economic recovery and development. In response to these challenges, Israel adopted a policy of austerity from 1949 through 1959. This decade-long period was marked by strict rationing of food and consumer goods, high unemployment rates, and a scarcity of foreign currency, which severely constrained imports and industrial expansion. The government implemented tight controls over wages, prices, and foreign exchange to manage the fragile economy and to prioritize essential goods and services. Despite these measures, the economic hardships were acute, and the government faced continuous pressure to balance the needs of a rapidly growing population with limited fiscal and monetary resources. A pivotal moment in Israel’s early economic recovery was the 1952 agreement with West Germany, in which the latter committed to pay reparations to Israel. These payments were intended to compensate for Jewish property confiscated during the Holocaust, address Holocaust-related material claims, and cover the costs associated with absorbing refugees. The negotiations were politically sensitive and controversial within Israel, but the agreement ultimately provided a vital source of capital that supported a range of development projects and social programs. Over the ensuing fourteen years, West Germany paid a total of 3 billion Deutsche Marks, which, based on the currency conversion rates of 1953 to 1955, amounted to approximately US$714 million. Adjusted for inflation and currency changes, this sum is roughly equivalent to US$7 billion in modern terms. The reparations from West Germany rapidly became a cornerstone of Israel’s national income, reaching a peak where they constituted as much as 87.5% of the country’s total income in 1956. This influx of funds was instrumental in stabilizing the economy and financing infrastructure and industrial development during a critical period of state-building. Despite these economic ties, Israel never established formal diplomatic relations with East Germany, reflecting the broader geopolitical divisions of the Cold War era and Israel’s alignment with Western powers. In parallel with reparations, Israel sought to mobilize financial support from the Jewish diaspora, particularly in North America. In 1950, the Israeli government launched the Israel Bonds program, targeting American and Canadian Jews as a means to raise capital for nation-building efforts. By 1951, these bonds had raised over US$52 million, providing a significant injection of funds into the economy. Beyond bonds, many American Jews contributed private donations, which by 1956 were estimated to total approximately US$100 million annually. These philanthropic efforts reflected a strong sense of solidarity and commitment to Israel’s development within the diaspora community. The funds raised through bond sales played a critical role in Israel’s special development budget, accounting for about 35% of its financing by 1957. Over time, the country also became increasingly reliant on economic aid from the United States, which emerged as Israel’s most important source of international political support and economic assistance. American aid facilitated military procurement, infrastructure projects, and social welfare programs, underpinning Israel’s economic and security stability during the Cold War and beyond. The capital derived from reparations, bonds, and private donations was strategically invested in a range of industrial and agricultural projects designed to foster economic self-sufficiency. Among the major undertakings financed were the Hadera power plant, which significantly expanded the country’s electricity generation capacity, and the Dead Sea Works, which developed mineral extraction and chemical industries. The National Water Carrier project was another transformative infrastructure initiative, enabling the transfer of water from the Sea of Galilee to the arid southern regions, thereby supporting agricultural expansion and settlement. Additionally, port developments in Haifa, Ashdod, and Eilat enhanced Israel’s maritime trade capabilities, while investments in desalination plants and national infrastructure laid the groundwork for sustained economic growth and improved living standards. Post-independence economic policy prioritized the establishment of industries in designated development zones such as Lachish, Ashkelon, the Negev, and the Galilee. These areas were targeted to promote regional development, reduce socio-economic disparities, and absorb immigrant populations by creating employment opportunities. The government’s focus on regional industrialization was complemented by the expansion of the textile industry, which benefited from profitable cotton cultivation. By the late 1960s, textiles had become Israel’s second-largest industrial sector after foodstuffs, accounting for approximately 12% of industrial exports. This sector’s growth was driven by both domestic demand and export opportunities, contributing significantly to the country’s industrial diversification. However, the profitability of the textile industry declined in the 1990s due to increased competition from low-cost labor markets in East Asia. To remain viable, many Israeli textile companies began subcontracting work to Israeli Arab sewing shops, leveraging local labor cost advantages. Subsequently, production shifted further abroad under the Qualified Industrial Zones (QIZ) arrangement, which allowed Israeli companies to operate in Jordan and Egypt with preferential access to U.S. markets. By the early 2000s, Israeli firms operated around 30 manufacturing plants in Jordan, generating exports valued at approximately US$370 million annually. These exports supplied major international retailers, including Marks & Spencer, The Gap, Victoria’s Secret, Walmart, Sears, Ralph Lauren, Calvin Klein, and Donna Karan, illustrating the integration of Israeli textile production into global supply chains. During its first two decades of statehood, Israel experienced rapid economic growth, with annual rates exceeding 10%. Household expenditures of wage-earner families rose by 97% in real terms between 1950 and 1963, reflecting improvements in living standards and consumer purchasing power. Per capita consumption increased even more dramatically, by 221% from 1955 to 1966, signaling broad-based economic advancement. This growth was underpinned by investments in agriculture, infrastructure, and industry, as well as the mobilization of human capital and capital inflows from abroad. The 1970s saw a shift in investment priorities from agriculture and infrastructure toward industry and defense, laying the foundation for Israel’s emerging technology sector. This strategic reorientation reflected changing security concerns and the recognition of high-technology industries as engines of future economic growth. However, the 1973 Yom Kippur War precipitated a period of economic stagnation characterized by stalled growth, soaring inflation, and increased government spending on defense and social programs. The war’s economic impact was compounded by global oil price shocks and internal fiscal imbalances. A significant financial crisis occurred in 1983 with the Bank stock crisis, which exposed vulnerabilities in the Israeli banking sector and undermined investor confidence. By 1984, inflation had escalated to nearly 450% annually, with projections indicating it could surpass 1000% in 1985 if left unchecked. In response, the government implemented a comprehensive economic stabilization plan in 1985, which combined fiscal austerity, monetary tightening, wage and price controls, and structural reforms aimed at liberalizing the economy. These measures successfully curbed hyperinflation and restored macroeconomic stability, setting the stage for rapid economic growth throughout the 1990s. Israel’s stabilization program became a model for other nations grappling with similar economic crises. Two key developments transformed Israel’s economy beginning in the early 1990s. The first was a series of immigration waves from the former Soviet Union, which brought over one million highly educated Jewish immigrants, who today constitute about 15% of Israel’s population. This influx significantly enhanced Israel’s human capital, particularly in scientific and technical fields, fueling the expansion of the country’s technology sector. The second development was the peace process initiated at the Madrid Conference in October 1991, which culminated in the 1994 peace treaty with Jordan. This diplomatic breakthrough improved regional stability and opened new avenues for economic cooperation and trade. The arrival of Soviet Jewish immigrants contributed substantial scientific and technical expertise, bolstering Israel’s burgeoning high-tech industry. Many of these immigrants possessed advanced degrees and professional experience, which facilitated innovation and entrepreneurship in sectors such as software development, telecommunications, and biotechnology. Their integration into the workforce helped position Israel as a global leader in technology and innovation. The early 2000s presented new economic challenges for Israel, as the collapse of the dot-com bubble coincided with the outbreak of the Second Intifada. The ensuing period was marked by heightened security costs, reduced foreign investment, and a sharp decline in tourism. Economic growth slowed dramatically, with unemployment reaching double-digit levels. In one quarter of 2000, growth had been a robust 10%, but by 2002, the economy contracted by about 4% in a single quarter, reflecting the severity of the downturn. Despite these setbacks, Israel managed to recover by expanding exports to new markets, especially in East Asia. This recovery was driven by a rebound in the technology sector and increased global demand for computer software and security products following the September 11, 2001 terrorist attacks. The heightened international focus on security technologies created significant export opportunities for Israeli firms specializing in defense and cybersecurity solutions. Prior investments in the technology sector, originally aimed at reducing domestic unemployment, positioned Israel to capitalize on this surge in demand. In 2006, foreign investment in Israel reached US$13 billion, according to the Manufacturers Association of Israel, indicating growing international confidence in the Israeli economy despite ongoing regional instability. This influx of capital supported further industrial development, innovation, and integration into global markets. Israel’s total gross external debt stood at approximately US$95 billion, representing about 41.6% of its GDP. However, since 2001, Israel has functioned as a net lender nation, with a net external debt surplus of US$60 billion as of June 2012. This status reflects the country’s strong external financial position and its ability to generate capital abroad. Israel maintained a current account surplus of about 3% of GDP in 2010, and by 2023, this surplus had expanded to US$25.3 billion, underscoring the economy’s sustained external strength. During the late-2000s global recession, Israel demonstrated remarkable economic resilience. The country maintained positive GDP growth in 2009 and concluded the decade with a lower unemployment rate than many Western economies. This resilience was attributed to Israel’s position as a net lender, conservative macroeconomic policies implemented by the government and the Bank of Israel, and prudent financial regulations. Notably, the government resisted pressure from banking institutions to allocate large sums of public funds for early bailouts, thereby limiting risky banking behavior and preserving financial stability. The implementation of recommendations from the Bach’ar commission in the early to mid-2000s further strengthened the Israeli financial system. The commission advocated for the separation of banks’ depository and investment activities, reducing systemic risk within the banking sector. This approach contrasted with trends in the United States, where deregulation and easing of such restrictions increased risk-taking and contributed to financial instability during the global financial crisis. Today, American investors constitute the most significant group of foreign investors in Israel, reflecting the deep economic and political ties between the two countries. This investment supports a diverse range of sectors, including technology, manufacturing, and services, and continues to play a vital role in Israel’s economic development and integration into the global economy.

In May 2007, Israel received a formal invitation to initiate accession discussions with the Organisation for Economic Co-operation and Development (OECD), marking a significant milestone in the country’s economic and diplomatic relations with the international community. This invitation signaled the beginning of a rigorous evaluation process during which Israel’s economic policies, governance structures, and institutional frameworks were thoroughly examined to determine its eligibility for membership in the OECD, an organization primarily composed of advanced economies committed to promoting policies that improve the economic and social well-being of people worldwide. The initiation of these discussions reflected recognition of Israel’s rapid economic development and growing integration into the global economy, particularly in sectors such as technology, innovation, and trade. Following three years of comprehensive assessments and negotiations, the OECD held a vote in May 2010 to decide on Israel’s membership status. The decision was unanimous in favor of inviting Israel to become a full member, underscoring broad international support for its accession despite political sensitivities surrounding the region. Notably, the vote occurred amid objections from Palestinian representatives, who expressed concerns related to the ongoing Israeli-Palestinian conflict and its implications for regional stability. Nevertheless, the OECD member countries collectively endorsed Israel’s inclusion, emphasizing the country’s adherence to the organization’s standards and its contributions to global economic progress. This unanimous vote was a testament to Israel’s transformation into a high-income economy with robust institutions and a commitment to the principles upheld by the OECD. Israel officially became a full member of the OECD on 7 September 2010, joining a group of 34 countries dedicated to fostering economic growth, stability, and improved living standards through coordinated policies and shared best practices. Membership in the OECD provided Israel with enhanced opportunities for international cooperation, access to a platform for policy dialogue, and the ability to influence global economic governance. It also signified international recognition of Israel’s economic maturity and its role as a key player in the global knowledge economy. The accession process and subsequent membership further encouraged Israel to align its policies with OECD guidelines, promoting transparency, competitiveness, and sustainable development. Throughout the accession process and upon Israel’s acceptance, the OECD praised the country for its remarkable scientific and technological progress, highlighting its significant achievements in innovation and research. Israel’s dynamic high-tech sector, often referred to as the “Start-Up Nation,” was recognized for its contributions to advancements in fields such as information technology, biotechnology, and clean energy. The OECD underscored Israel’s ability to foster an environment conducive to entrepreneurship and technological breakthroughs, which had propelled the country to the forefront of global innovation. This recognition was reflective of Israel’s substantial investments in education, research and development, and its vibrant ecosystem of universities, research institutions, and private enterprises. The OECD described Israel as having “produced outstanding outcomes on a world scale” in terms of scientific and technological advancements, emphasizing the country’s exceptional performance relative to other member states and the global community. This characterization acknowledged Israel’s success in translating scientific research into practical applications that drive economic growth and improve quality of life. The organization noted that Israel’s achievements were not only significant in terms of technological innovation but also in their impact on global markets and industries. By joining the OECD, Israel aligned itself with other leading economies that prioritize innovation as a key driver of economic prosperity and social development, further solidifying its reputation as a hub of cutting-edge science and technology.

Despite experiencing notable economic prosperity over recent decades, the Israeli economy continues to confront a range of significant challenges that can be broadly categorized into short-term and long-term issues. While the country has established itself as a global leader in certain high-technology sectors, particularly telecommunications, its inability to replicate this success across other emerging industries has constrained its overall economic growth potential in the near term. This limitation has raised concerns among policymakers and economists regarding the diversification of Israel’s industrial base and its capacity to sustain robust expansion beyond the telecommunications sector. The telecommunications industry, which includes pioneering companies such as Bezeq and Cellcom, had historically driven much of Israel’s technological innovation and export revenues; however, the failure to foster similarly large-scale successes in other sectors has curtailed the breadth of opportunities for economic advancement. Compounding these short-term challenges is the difficulty Israel has faced in developing large multinational corporations over the past decade. Despite a vibrant startup ecosystem and significant venture capital investment, the transition from startup to multinational enterprise has proven elusive for many Israeli companies. This gap has raised concerns about the country’s ability to generate sufficient employment opportunities within advanced industries that require large-scale operations and global market penetration. The absence of a robust cadre of multinational firms limits Israel’s capacity to create high-quality jobs and to integrate more deeply into the global economy. Consequently, the economy risks becoming overly reliant on small and medium-sized enterprises and startups, which, while innovative, may not provide the employment stability or scale necessary for sustained economic growth. In the long term, Israel faces demographic and social challenges that threaten to undermine its economic sustainability. One of the most pressing issues is the high dependency on the rapidly increasing population of Ultra-Orthodox Jews, also known as Haredi Jews, who exhibit notably low levels of official labor force participation, particularly among men. This demographic trend is significant because the Ultra-Orthodox community tends to have larger family sizes and a younger age profile compared to the general population, resulting in a growing share of the population that is economically inactive or underemployed. The relatively low participation rates in the workforce are attributed to cultural and religious factors, including extended periods of religious study and limited engagement with secular education and employment sectors. This dynamic poses a risk of a substantially lower employment-to-population ratio in the future, which could hinder economic productivity and growth. The implications of this demographic shift extend to the broader economic structure, as the increasing dependency ratio—the proportion of non-working individuals supported by the working population—is expected to rise. An elevated dependency ratio places greater fiscal pressure on social welfare systems and public finances, potentially necessitating higher taxation or reduced public services. The long-term sustainability of Israel’s economy may be compromised if a growing segment of the population remains outside the labor market, as this would limit the country’s ability to generate sufficient economic output and tax revenues to support social programs and infrastructure development. The challenge is further complicated by the need to integrate the Ultra-Orthodox population into the workforce without undermining their cultural and religious practices, requiring nuanced policy approaches. Stanley Fischer, who served as the governor of the Bank of Israel, explicitly highlighted the economic ramifications of rising poverty levels within the Ultra-Orthodox community. Fischer emphasized that the increasing incidence of poverty among this group is detrimental to the overall health of the Israeli economy, as it exacerbates social inequalities and limits the potential for inclusive growth. His observations underscore the interconnectedness of demographic trends, labor market participation, and economic well-being, suggesting that addressing poverty in the Ultra-Orthodox sector is not only a social imperative but also an economic necessity. Fischer’s analysis brought attention to the urgency of implementing targeted interventions to improve employment opportunities and reduce poverty within this community. Supporting Fischer’s concerns, data published by Ian Fursman reveal that approximately 60% of poor households in Israel belong to the Haredi Jewish community and Israeli Arabs. This statistic highlights the concentration of poverty within specific demographic groups that together represent a substantial portion of the population. The Israeli Arab population, which includes Muslim, Christian, and Druze minorities, faces its own set of economic challenges, including lower average incomes, higher unemployment rates, and limited access to certain sectors of the economy. The intersection of poverty within these two groups points to systemic issues related to education, employment opportunities, and social integration that have persisted over time. The combined population of Haredi Jews and Israeli Arabs constitutes roughly 25–28% of the total Israeli population, making their economic integration critical to the country’s future prosperity. Given their significant demographic weight, the economic marginalization of these communities could have profound implications for national economic performance and social cohesion. Efforts to improve labor force participation and reduce poverty among these groups are therefore central to addressing Israel’s long-term economic challenges. Policymakers recognize that fostering inclusion and equal opportunity for these populations is essential to maintaining economic dynamism and social stability. In response to these multifaceted challenges, several organizations have emerged to actively address the economic disparities faced by the Ultra-Orthodox and Israeli Arab communities. Among these are The Kemach Foundation, Gvahim, Jerusalem Village, and The Jerusalem Business Networking Forum, each of which implements initiatives aimed at enhancing employment prospects and professional integration. The Kemach Foundation, for example, focuses on providing vocational training, career counseling, and job placement services tailored to the needs of the Haredi community, facilitating pathways into high-demand sectors. Gvahim specializes in assisting skilled immigrants and minorities, including Israeli Arabs, by offering mentorship, networking opportunities, and business development support. Jerusalem Village and The Jerusalem Business Networking Forum organize events and programs designed to foster connections between job seekers from marginalized communities and potential employers, promoting social and economic inclusion. These organizations play a crucial role in bridging gaps between underrepresented populations and the broader labor market, contributing to efforts aimed at reducing poverty and increasing workforce participation. By creating targeted support systems and fostering collaboration between communities and the private sector, they help mitigate some of the structural barriers that have historically limited economic opportunities for these groups. Their work complements government policies and initiatives, representing a multifaceted approach to tackling Israel’s complex economic challenges. Collectively, these efforts underscore the recognition within Israeli society of the need to address demographic and social factors as integral components of economic strategy.

Following the outbreak of the 2023 Israel–Gaza war, Israel’s financial markets experienced pronounced volatility, reflecting widespread economic instability. The Tel Aviv Stock Exchange registered a sharp decline in stock prices as investor confidence waned amid escalating geopolitical tensions and uncertainty about the conflict’s duration and impact. Concurrently, the Israeli shekel depreciated significantly against major currencies, signaling a loss of faith in the country’s short-term economic prospects and heightened risk perceptions among foreign exchange markets. These financial indicators underscored the immediate economic repercussions of the war, as capital outflows increased and market participants reassessed risk premiums associated with Israeli assets. Economic analyses projected that the long-term financial consequences of the conflict would be severe, estimating total economic losses amounting to approximately $400 billion over the subsequent decade. This figure encompassed both direct and indirect costs, reflecting the multifaceted nature of the war’s impact on Israel’s economy. The magnitude of the projected losses highlighted the extensive disruption caused by the conflict, affecting not only immediate military expenditures and infrastructure damage but also the broader economic environment. The substantial economic burden was expected to influence fiscal policy, investment decisions, and growth trajectories for years to come. A detailed breakdown of the anticipated economic shock revealed that approximately 90% of the total $400 billion loss would derive from indirect effects rather than direct war-related expenses. These indirect consequences included a significant reduction in investment inflows, as heightened uncertainty and risk aversion discouraged both domestic and foreign investors from committing capital to Israeli ventures. Additionally, disruptions in the labor market emerged as a critical factor, with workforce displacements, reduced productivity, and increased unemployment contributing to diminished economic output. The conflict also impeded productivity growth by diverting resources away from innovation and development toward immediate security concerns, thereby stalling long-term economic advancement. This analysis underscored the pervasive and enduring nature of the war’s economic ramifications beyond the battlefield. In August 2024, reflecting the heightened financial risks and economic uncertainty stemming from the conflict, Fitch Ratings downgraded Israel’s credit rating. This decision by one of the major global credit rating agencies indicated a reassessment of Israel’s sovereign creditworthiness in light of the increased fiscal pressures and potential challenges to debt servicing capacity. The downgrade signaled to international investors and financial markets that Israel’s economic environment had become more precarious, potentially leading to higher borrowing costs and constrained access to capital markets. Fitch’s action was emblematic of broader concerns regarding the sustainability of Israel’s public finances amid ongoing security challenges and the substantial economic costs associated with the war. The Bank of Israel provided its own estimates regarding the fiscal impact of the conflict, projecting that war-related costs incurred between 2023 and 2025 could reach as high as $55.6 billion. This comprehensive figure included direct military expenditures such as defense mobilization, procurement of equipment, and operational costs, as well as reconstruction expenses necessary to repair infrastructure and housing damaged during hostilities. Additionally, the estimate accounted for other war-associated expenditures, including humanitarian aid, social welfare support for displaced populations, and economic stabilization measures implemented by the government. The Bank’s assessment highlighted the immediate budgetary strain imposed by the conflict and the substantial allocation of public resources required to address its multifaceted consequences. The conflict’s impact on domestic economic activity was starkly illustrated by a 27% decrease in consumer spending. This sharp contraction reflected the erosion of household confidence and purchasing power amid heightened uncertainty, security concerns, and disruptions to daily life. Many consumers curtailed discretionary expenditures, prioritizing savings and essential goods, while others faced income losses due to job disruptions or reduced working hours. The decline in consumer spending had a cascading effect on various sectors of the economy, particularly retail, hospitality, and services, which rely heavily on robust domestic demand. This downturn further compounded the broader economic slowdown triggered by the conflict. International trade flows also suffered significant setbacks in the aftermath of the war. Imports into Israel fell by 42%, indicating a substantial contraction in the country’s engagement with global supply chains and international markets. This decline was attributable to multiple factors, including logistical disruptions caused by security measures, damaged infrastructure at ports and border crossings, and reduced demand for imported goods amid weakened domestic consumption. The sharp reduction in imports posed challenges for industries dependent on foreign raw materials and components, thereby affecting production capabilities and employment in related sectors. Exports from Israel similarly experienced a notable decline, decreasing by 18% during the post-war period. This downturn adversely affected the country’s trade balance and overall economic performance, as diminished export revenues reduced foreign currency inflows and constrained growth opportunities for export-oriented industries. The contraction in exports was driven by disrupted supply chains, damaged production facilities, and decreased global demand linked to geopolitical uncertainties. The combined effect of reduced imports and exports underscored the extensive economic dislocation caused by the conflict, highlighting vulnerabilities in Israel’s integration with the global economy and the challenges of sustaining trade amid ongoing security crises.

According to the 2024 Henley & Partners Report, approximately 1,700 millionaires departed Israel since 2023, seeking investment migration opportunities abroad. This notable outflow of high-net-worth individuals reflects a growing trend among Israel’s affluent population to diversify their residency and citizenship options through investment-based migration programs. These individuals, often characterized by their substantial financial assets and business interests, pursued alternative jurisdictions that offer greater political stability, economic security, and global mobility. The report underscores that this migration wave is not merely a pursuit of lifestyle enhancement but a strategic response to mounting uncertainties within Israel’s domestic environment. The primary motivation behind this exodus is the desire to mitigate various risks associated with remaining in Israel. Wealthy Israelis increasingly viewed their home country as vulnerable to geopolitical tensions, economic volatility, and regulatory unpredictability. By acquiring residency or citizenship elsewhere through investment migration schemes, these individuals aimed to safeguard their wealth and ensure access to more stable legal and financial frameworks. This approach also provided them with greater flexibility to relocate if circumstances in Israel deteriorated further, thus functioning as a form of insurance against potential adverse developments. The pursuit of alternative residency options has become a critical component of wealth preservation strategies for Israel’s elite. The Henley & Partners Report highlights a remarkable 232% increase in investment migration applications from Israeli citizens in 2023 compared to previous years. This surge represents one of the most significant year-over-year growth rates in the global investment migration sector, signaling a profound shift in the behavior of Israel’s affluent demographic. The dramatic rise in applications indicates not only heightened interest but also an accelerated urgency among millionaires to secure foreign residency or citizenship. This trend has attracted attention from governments and migration advisory firms worldwide, many of which have reported a substantial uptick in inquiries and applications originating from Israel during this period. Several economic factors contributed to this sharp increase in investment migration activity. One key driver was the depreciation of the Israeli shekel against the US dollar, which fell by approximately 5% in 2023. This currency weakening eroded the purchasing power of Israeli investors when considering foreign assets priced in stronger currencies, thereby incentivizing them to seek investment opportunities and residency in countries with more stable or appreciating currencies. The shekel’s decline also heightened concerns about inflation and economic instability, further motivating wealthy individuals to diversify their holdings internationally and reduce exposure to domestic currency risk. In addition to currency fluctuations, the real estate market in Tel Aviv, Israel’s major economic hub, experienced a notable downturn, with prices declining by around 10% in 2023. This contraction in property values represented a significant shift in a market that had previously seen robust growth and was considered a reliable store of wealth. The decline in real estate prices not only affected the net worth of property owners but also dampened investor confidence in one of Israel’s most important asset classes. As a result, many high-net-worth individuals reassessed their domestic investment portfolios and increasingly viewed foreign real estate markets as more attractive and secure alternatives for capital allocation and residency-linked investments. Beyond economic considerations, broader geopolitical and social dynamics played a crucial role in driving this migration trend. Israel’s increasing international isolation, partly due to shifting diplomatic alignments and regional tensions, contributed to a sense of uncertainty among its wealthy citizens. This isolation manifested in reduced foreign investment inflows, diplomatic challenges, and concerns over potential sanctions or trade restrictions, all of which undermined confidence in Israel’s long-term economic prospects. The war in 2023 further exacerbated these pressures, imposing significant financial strains on the country’s economy and creating an environment of heightened risk and unpredictability. The conflict’s impact on public finances, security expenditures, and investor sentiment intensified the urgency for affluent Israelis to seek alternative residency options as a hedge against escalating instability. Collectively, these factors—currency depreciation, real estate market decline, international isolation, and the financial burdens of war—coalesced to create a perfect storm that propelled a substantial portion of Israel’s millionaire population to pursue investment migration. The phenomenon reflects a complex interplay between economic realities and geopolitical challenges, highlighting how high-net-worth individuals respond to shifts in their national environment by leveraging global mobility and investment migration pathways. The 2024 Henley & Partners Report thus provides a comprehensive snapshot of this evolving dynamic, illustrating the profound impact of macroeconomic and political developments on the migration decisions of Israel’s wealthiest citizens.

The Red Sea crisis, triggered by a series of attacks carried out by Houthi forces, has exerted a profound and multifaceted impact on the Israeli economy, primarily through the disruption of critical maritime shipping routes. The Houthis, an armed political movement based in Yemen, escalated hostilities in the Red Sea region, targeting commercial vessels and thereby compromising the security and reliability of one of the world’s most vital maritime corridors. This escalation in conflict has directly impeded the flow of goods and raw materials essential to Israel’s trade and industrial sectors, given the country’s reliance on maritime transport for both imports and exports. As a result, the crisis has not only interrupted the physical movement of cargo but has also instigated a ripple effect of economic consequences that have reverberated through Israel’s broader economic landscape. One of the most immediate and tangible effects of the Red Sea crisis has been the substantial increase in operational costs for shipping companies engaged in Israeli trade. The heightened threat environment necessitated additional security measures, including the deployment of armed escorts and the implementation of more rigorous risk assessments, all of which have contributed to escalating expenses. These increased costs have, in turn, exerted pressure on the maritime sector’s profitability and viability, leading to a contraction in employment opportunities within the industry. Job losses have become a significant concern, as companies facing diminished revenues and higher operational burdens have been compelled to downsize their workforce to maintain financial stability. The maritime sector, which historically has been a vital source of employment and economic activity in Israel, has thus experienced a notable downturn directly attributable to the ongoing conflict in the Red Sea. The port of Eilat, Israel’s principal southern maritime gateway located on the northern tip of the Red Sea, has borne the brunt of the crisis with particularly severe consequences. Eilat serves as a critical hub for the import and export of goods, linking Israel to global markets via the Red Sea and beyond. However, the escalation of hostilities and the attendant security risks have led to near-complete shutdowns of port operations on multiple occasions. These shutdowns have severely disrupted the flow of goods, causing delays and backlogs that have undermined the port’s operational capacity. The financial strain resulting from these interruptions has pushed the port to the brink of bankruptcy, raising urgent concerns about its long-term sustainability. In response to the mounting crisis, there have been widespread calls within Israel for government intervention and assistance to stabilize the port’s operations and prevent a collapse that would have far-reaching economic repercussions. The human cost of the crisis at the port of Eilat has been starkly evident in the precarious employment situation facing its workforce. Approximately 50% of the port’s employees have been identified as being at risk of losing their jobs due to the sustained operational disruptions and financial instability. This potential loss of employment threatens not only the livelihoods of individual workers and their families but also the economic vitality of the surrounding region, which depends heavily on the port’s activity. The reduction in workforce has further implications for the port’s ability to recover and resume full operations once the security situation improves, creating a feedback loop that exacerbates both economic and social challenges. The precarious employment scenario underscores the broader human dimension of the crisis, highlighting how geopolitical conflicts can translate into significant socioeconomic distress at the local level. In response to the heightened risks associated with the Red Sea corridor, many international and Israeli shipping companies have adopted the strategy of avoiding the Red Sea entirely. Instead of navigating the shorter but more perilous route through the Red Sea and the Suez Canal, these companies have opted to reroute their vessels around the southern tip of Africa via the Cape of Good Hope. This alternative route, while safer in terms of avoiding conflict zones, significantly extends the duration of maritime journeys by approximately three weeks. The lengthened transit times not only delay the delivery of goods but also disrupt supply chains, complicating inventory management and increasing the risk of shortages or surpluses in various sectors. The decision to reroute vessels reflects a calculated trade-off between safety and efficiency, with profound implications for the cost structures and logistical planning of shipping operations connected to Israel. The extended voyages necessitated by rerouting around Africa have led to a substantial increase in shipping costs, further exacerbating the economic strain imposed by the Red Sea crisis. Longer routes require additional fuel consumption, increased crew wages due to extended time at sea, and higher maintenance expenses, all of which contribute to elevated operational expenditures for shipping companies. These increased costs are often passed on to importers and exporters through higher freight charges, thereby inflating the prices of goods and raw materials within Israel. The cumulative effect is a broader inflationary pressure on the Israeli economy, as businesses and consumers alike face higher costs attributable to the disruption of maritime trade routes. This economic burden compounds the challenges posed by the crisis, placing additional stress on sectors already grappling with global market fluctuations and domestic economic conditions. In addition to the logistical and operational challenges, the Red Sea crisis has precipitated a dramatic surge in insurance premiums for vessels operating in the affected waters. The heightened risk of attacks, piracy, and collateral damage has led insurance underwriters to reassess the risk profiles associated with maritime operations in the Red Sea, resulting in premium increases that have reached unprecedented levels. Some Israeli ships have experienced insurance cost hikes of up to 250%, reflecting the severity of perceived threats and the reluctance of insurers to underwrite voyages through the conflict zone without substantial financial compensation. This sharp rise in insurance premiums represents a significant financial burden for shipping companies, further diminishing the economic viability of routes passing through the Red Sea and compelling more operators to seek alternative pathways or suspend operations altogether. The elevated risk environment has also led to instances where certain ships have been denied insurance coverage entirely, as insurers have deemed the conflict zone too hazardous to underwrite. This denial of coverage effectively prohibits some vessels from operating in the Red Sea, as maritime law and commercial prudence require ships to maintain valid insurance to enter ports and navigate international waters. The absence of insurance coverage not only restricts shipping options but also increases the vulnerability of shipowners and operators to potential losses, including damage, cargo theft, or liability claims. The refusal by insurers to provide coverage underscores the profound uncertainty and instability engendered by the Red Sea crisis, illustrating how geopolitical conflicts can disrupt fundamental aspects of global trade and maritime commerce. Together, these factors have contributed to a complex economic predicament for Israel, intertwining security concerns with economic imperatives and highlighting the intricate dependencies of modern maritime logistics.

On 19 July 2024, the International Court of Justice (ICJ) issued a significant advisory opinion addressing the legal status of Israel’s occupation of Palestinian territories. The Court declared that states are under an obligation not to recognize, assist, or support the illegal circumstances arising from Israel’s presence in these territories. This advisory opinion underscored the principle that the occupation, as characterized by the ICJ, contravenes international law, and consequently, no country should lend legitimacy or aid to the situation created by Israel’s actions. The ruling reinforced the notion that international actors must refrain from any form of recognition that could implicitly or explicitly endorse the occupation’s legality. In further elaboration, the ICJ specified that all nations must avoid engaging in economic or trade relations with Israel insofar as such relations pertain to the Occupied Palestinian Territories (OPT) or any areas where Israel’s presence is considered unlawful. The Court’s opinion highlighted that economic interactions, including trade agreements, investments, and commercial activities, which involve the OPT, risk perpetuating or reinforcing the illegal occupation. By issuing this guidance, the ICJ sought to establish a clear legal framework that obliges states to dissociate themselves from economic practices that might contribute to the entrenchment of Israel’s control over these territories. The advisory opinion also emphasized the necessity for countries to adopt proactive measures aimed at preventing trade or investment activities that sustain or maintain the illegal situation established by Israel in the OPT. This directive called for comprehensive regulatory and legislative actions within states’ jurisdictions to block economic flows that could bolster the occupation. Such measures might include prohibitions on imports and exports of goods produced in the occupied territories, restrictions on financial investments in enterprises operating within the settlements, and other forms of economic disengagement designed to uphold international law. The ICJ’s advisory thus positioned economic boycotts and sanctions as legitimate tools for the international community to ensure compliance with legal obligations concerning the occupation. Earlier, on 26 May 2023, the European Trade Union Confederation (ETUC), an umbrella organization representing over 45 million workers and their affiliated trade unions across Europe, publicly announced a boycott of products originating from illegal Israeli settlements situated within the occupied Palestinian territories. This decision by the ETUC marked a significant development within the labor movement, reflecting a growing commitment to align trade union policies with international legal standards and human rights considerations. The boycott targeted goods produced in settlements deemed illegal under international law, signaling a clear stance against economic activities that support or benefit from the occupation. The ETUC stressed the critical importance of implementing regulatory measures to prohibit the import and export of goods manufactured in these illicit settlements by entities operating within the European Union. This call for regulatory action was aimed at ensuring that European companies and consumers do not inadvertently contribute to the economic viability of the settlements, which are widely regarded as violations of international law. By advocating for such prohibitions, the ETUC sought to promote ethical trade practices and to prevent the normalization of economic relations that could undermine efforts to resolve the Israeli-Palestinian conflict. The measures championed by the ETUC were explicitly framed within the context of existing European Union treaties and international legal norms. The Confederation emphasized that their boycott and the associated calls for regulatory enforcement were consistent with the EU’s commitments to uphold international law and to avoid supporting illegal settlement activities. This alignment underscored the broader legal and political consensus within the European Union regarding the status of the settlements and the necessity of preventing economic support that could entrench their existence. The ETUC’s position thus reinforced the growing momentum within European civil society and political institutions to address the economic dimensions of the Israeli occupation through principled and legally grounded actions.

Following the implementation of the 2023 Israeli judicial reform, the banking sector in Israel experienced a pronounced surge in fund withdrawals, with the volume of withdrawals escalating to levels approximately ten times higher than the typical rate. This unprecedented outflow of capital reflected widespread public concern and uncertainty regarding the potential economic consequences of the judicial changes. The rapid withdrawal of funds placed considerable strain on financial institutions, prompting urgent discussions among bank executives about the stability of the banking system and the broader economic implications of the reform. These developments underscored the sensitivity of the financial sector to political shifts and the critical role of public confidence in maintaining economic equilibrium. Bank executives issued warnings that the judicial reform could have far-reaching negative effects on the Israeli economy. They emphasized that the political changes risked undermining the stability of the national currency, the shekel, which could lead to its depreciation in international currency markets. A weaker shekel would, in turn, increase the cost of imports and contribute to inflationary pressures within the domestic economy. Furthermore, the executives highlighted the potential erosion of investor confidence, which could deter both foreign and domestic investment. Such a decline in confidence was seen as particularly detrimental given Israel’s reliance on a robust investment climate to sustain its economic growth, especially in high-tech and innovation-driven sectors. A report published by The Times of Israel on March 5, 2023, provided empirical evidence of these economic concerns. The report detailed a depreciation of the shekel against major global currencies, notably the US dollar and the euro. This currency weakening was accompanied by a decline in the performance of the Tel Aviv Stock Exchange (TASE), which fell relative to stock markets in the European Union and the United States during the same period. The simultaneous depreciation of the shekel and the downturn in TASE indicated a loss of investor confidence and heightened market volatility. Analysts attributed these trends to the uncertainty generated by the judicial reform, which appeared to have unsettled both local and international investors, prompting a reassessment of risk and asset allocation. The economic repercussions extended beyond currency and stock market fluctuations, as numerous companies, particularly within Israel’s vital technology sector, began withdrawing their investments from the country. This capital flight was significant in scale, with an estimated outflow exceeding $4 billion within just a few weeks following the announcement of the judicial reform. The technology sector, which constitutes a substantial portion of Israel’s economic output and export earnings, was especially vulnerable due to its dependence on investor confidence and access to global capital markets. The withdrawal of investments by these companies reflected concerns about the potential impact of the judicial changes on the regulatory environment, legal protections, and the overall business climate. This exodus of capital posed a serious challenge to Israel’s economic stability and growth prospects, highlighting the interconnectedness of political decisions and economic outcomes in a highly globalized financial system.

The economic data of Israel from 1980 through 2021, supplemented by International Monetary Fund (IMF) staff estimates for the period 2022 to 2027, provides a comprehensive overview of the country’s macroeconomic performance over more than four decades. Key indicators presented include gross domestic product (GDP) measured in purchasing power parity (PPP) and nominal terms, GDP per capita, inflation rates, unemployment levels, government debt as a percentage of GDP, and annual growth rates. These figures collectively illustrate Israel’s economic trajectory, highlighting periods of rapid expansion, inflationary challenges, and recovery phases. Within the dataset, inflation rates that remained below 5% are distinctly marked in green, underscoring periods of relative price stability. In 1980, Israel’s economy was characterized by a GDP of approximately 28.4 billion US dollars in PPP terms, with GDP per capita standing at about 7,240.1 US dollars PPP. The nominal GDP at that time was slightly lower, at 24.9 billion US dollars, with a corresponding nominal GDP per capita of 6,356.5 US dollars. The economy experienced a moderate growth rate of 3.6%, yet inflation was extraordinarily high at 316.6%, reflecting significant macroeconomic instability. Unemployment was relatively low at 4.8%, though government debt data for this year was not available. This period was marked by the lingering effects of economic challenges including hyperinflation, which Israel sought to control through various stabilization policies. By 1981, the Israeli economy saw an increase in GDP to 32.5 billion US dollars PPP, with GDP per capita rising to 8,240.4 US dollars PPP. Nominal GDP also rose to 26.4 billion US dollars, and nominal GDP per capita reached 6,687.2 US dollars. Notably, inflation decreased substantially from the previous year’s peak, falling to 116.8%, signaling the initial success of government efforts to curb runaway price increases. Unemployment edged slightly upward to 5.1%, indicating some labor market adjustments during this period of economic transition. This phase reflected the beginning of a gradual stabilization process after the hyperinflationary crisis. In 1982, GDP continued its upward trajectory, reaching 35.0 billion US dollars PPP, with GDP per capita increasing to 8,717.7 US dollars PPP. Nominal GDP was recorded at 28.3 billion US dollars, and nominal GDP per capita at 7,040.6 US dollars. Inflation remained elevated but showed signs of moderation, declining slightly to 120.4%. Unemployment stabilized at 5.0%, reflecting a relatively steady labor market despite ongoing economic adjustments. These figures indicate that while inflation was still a significant challenge, the Israeli economy was gradually moving towards greater stability and growth. Throughout the 1980s, Israel’s GDP exhibited a consistent upward trend. By 1987, GDP had reached 49.6 billion US dollars PPP, with GDP per capita at 11,355.8 US dollars PPP. The nominal GDP for the same year was 40.8 billion US dollars. This period was marked by continued economic reforms and structural adjustments aimed at fostering growth and controlling inflation. By 1988, GDP had further increased to 53.2 billion US dollars PPP, with GDP per capita rising to 11,975.7 US dollars PPP. Nominal GDP reached 50.6 billion US dollars, and inflation had declined significantly to 16.2%, reflecting the success of stabilization policies implemented earlier in the decade. The early 1990s saw continued economic expansion. In 1992, Israel’s GDP was recorded at 73.5 billion US dollars PPP, with GDP per capita at 14,340.4 US dollars PPP. Nominal GDP reached 77.0 billion US dollars, underscoring the country’s growing economic output. The 1990s were characterized by rapid economic growth, driven by technological innovation, increased foreign investment, and integration into global markets. By 1997, GDP had surged to 108.8 billion US dollars PPP, with GDP per capita rising to 18,677.3 US dollars PPP. Nominal GDP was 118.9 billion US dollars, reflecting robust economic performance during this decade. Inflation rates during the 1990s generally trended downward, contributing to a more stable economic environment. By 1998, inflation had decreased to 5.4%, and further declined to 5.2% in 1999. Unemployment rates during this period fluctuated between approximately 9.0% and 11.1%, indicating some labor market challenges despite overall economic growth. The relative decline in inflation and steady GDP growth contributed to increased investor confidence and economic resilience. Entering the 2000s, Israel’s economy continued to demonstrate steady growth. In 2000, GDP stood at 133.4 billion US dollars PPP, with GDP per capita at approximately 21,216.5 US dollars PPP. The following year, GDP increased slightly to 136.8 billion US dollars PPP, with GDP per capita at 21,258.3 US dollars PPP. Inflation rates during the period from 2000 to 2002 remained notably low, ranging between 1.1% and 5.7%, reflecting effective monetary policies aimed at price stability. However, unemployment rates were relatively high, fluctuating between 10.9% and 12.9%, suggesting ongoing challenges in the labor market during the early years of the new millennium. From 2003 onward, Israel’s economic expansion persisted. By 2004, GDP had reached 154.4 billion US dollars PPP, and by 2006, it had grown to 180.5 billion US dollars PPP, accompanied by corresponding increases in GDP per capita. This period was marked by increased technological innovation, growth in the high-tech sector, and improved export performance. The global financial crisis of 2008 posed challenges to the Israeli economy, yet GDP still stood at 206.8 billion US dollars PPP, with GDP per capita at 28,309.7 US dollars PPP. Inflation was moderate at 4.6%, and unemployment was recorded at 7.7%, indicating that while the crisis impacted the economy, Israel managed to maintain relative stability compared to many other nations. In the years following the 2008 financial crisis, Israel’s economy continued its growth trajectory. By 2011, GDP had increased to 242.0 billion US dollars PPP, and in 2012, it reached 255.7 billion US dollars PPP. During this period, GDP per capita exceeded 31,000 US dollars PPP, reflecting rising standards of living and economic prosperity. The year 2013 saw GDP climb to 280.0 billion US dollars PPP, with GDP per capita reaching 34,755.0 US dollars PPP. Inflation remained low at 1.5%, and unemployment decreased to 6.2%, signaling a strengthening labor market and controlled price levels. The COVID-19 pandemic in 2020 caused a significant economic contraction in Israel. GDP was recorded at 386.4 billion US dollars PPP, representing a slight decrease in GDP per capita compared to previous years. The growth rate turned negative at -1.9%, reflecting the widespread disruptions caused by the pandemic. Inflation dipped to -0.6%, indicating deflationary pressures, while unemployment rose to 4.3%, highlighting the economic impact of lockdowns and reduced economic activity. Despite these challenges, Israel’s economy demonstrated resilience in the face of unprecedented global conditions. In 2021, the Israeli economy rebounded strongly, with GDP increasing significantly to 437.1 billion US dollars PPP. GDP per capita rose to 46,659.3 US dollars PPP, and the growth rate surged to a robust 8.6%. Inflation returned to a moderate level of 1.5%, and unemployment decreased to 5.0%, reflecting the recovery from the pandemic-induced downturn and the effectiveness of fiscal and monetary measures to stimulate economic activity. Projections for the years 2022 through 2027, based on IMF staff estimates, indicate a continuation of steady economic growth. For 2022, GDP is estimated at 496.8 billion US dollars PPP, with GDP per capita at 52,173.1 US dollars PPP. The growth rate is projected at 6.1%, with inflation at 4.5% and unemployment at 3.9%. In 2023, GDP is forecasted to reach 530.0 billion US dollars PPP, with GDP per capita of 54,750.6 US dollars PPP. Growth is expected to moderate to 3.0%, inflation to 3.6%, and unemployment to 3.8%. The trend of steady growth is anticipated to continue into 2024, with GDP projected at 557.4 billion US dollars PPP, GDP per capita at 56,633.2 US dollars PPP, growth at 3.0%, inflation at 2.5%, and unemployment at 3.7%. Further projections for 2025 estimate GDP reaching 585.1 billion US dollars PPP, with GDP per capita of 58,474.2 US dollars PPP. Growth is forecasted at 3.1%, inflation at 2.2%, and unemployment remaining steady at 3.7%. By 2026, GDP is expected to increase to 615.6 billion US dollars PPP, with GDP per capita rising to 60,526.4 US dollars PPP. Growth is projected at 3.3%, inflation at 2.0%, and unemployment stable at 3.7%. The 2027 forecast anticipates GDP reaching 649.5 billion US dollars PPP, with GDP per capita of 62,813.2 US dollars PPP. The growth rate is expected to be 3.5%, inflation at 1.9%, and unemployment steady at 3.7%. These projections suggest a sustained period of economic expansion accompanied by low inflation and stable labor market conditions, reflecting the resilience and dynamism of Israel’s economy in the medium term.

The Kibbutzim, collective communities traditionally centered on agriculture, played a pivotal role in Israel’s economy from the early years of the state until the late 1970s. These communal settlements, founded on principles of shared ownership and cooperative labor, were instrumental in pioneering agricultural development in the region, transforming arid and semi-arid lands into productive farmland. The Kibbutzim not only contributed significantly to agricultural output but also served as social and economic models that supported the nascent Israeli economy during its formative decades. Over time, however, the economic landscape evolved, and the relative importance of the Kibbutzim diminished as Israel’s economy diversified and modernized, leading to a decline in their dominance within the agricultural sector by the end of the 1970s. By 2017, agriculture accounted for approximately 2.4% of Israel’s Gross Domestic Product (GDP), reflecting its transition from a primary economic driver to a more specialized and technologically advanced sector. This modest share of GDP underscores the country’s shift toward high-tech industries and services, yet agriculture remains a vital component of the national economy, particularly in terms of export revenue and technological innovation. The agricultural sector’s contribution is not limited to raw production but extends to sophisticated agricultural inputs and technologies that bolster productivity and sustainability. The total labor force in Israel numbered about 2.7 million people in 2017, with a small but significant portion engaged in agricultural activities. Approximately 2.6% of the workforce was directly employed in agricultural production, encompassing farming, livestock, and related activities. Additionally, 6.3% of the labor force was involved in services connected to agriculture, including agricultural machinery, marketing, distribution, and research. This distribution highlights the sector’s integration with ancillary industries and the importance of service-oriented roles that support and enhance agricultural productivity. Despite its advanced agricultural sector, Israel remains heavily dependent on imports for certain staple commodities, particularly cereal grains. The country imports roughly 80% of its grain consumption, reflecting limited domestic production capacity for these crops due to climatic and geographic constraints. This reliance on imported grains is a strategic aspect of Israel’s food security policy, balancing domestic production with global supply chains to meet the population’s nutritional needs. In contrast to its dependence on grain imports, Israel achieves a high degree of self-sufficiency in a wide range of other agricultural products and foodstuffs. The country’s diverse agricultural output includes fruits, vegetables, dairy, poultry, and fish, many of which are produced using advanced irrigation and cultivation techniques adapted to the local environment. This self-sufficiency is a testament to Israel’s innovative agricultural practices and its ability to optimize limited natural resources to sustain domestic food production. Historically, the cultivation of citrus fruits such as grapefruits, oranges, and lemons has been a longstanding agricultural tradition in the region, dating back centuries. These fruits thrived in the Mediterranean climate and became a staple of local agriculture well before the establishment of the modern state of Israel. The deep-rooted history of citrus farming laid the foundation for the development of a robust export industry, leveraging the region’s natural advantages and agricultural expertise. Citrus fruits continue to hold a prominent position as Israel’s major agricultural export product, contributing significantly to the country’s foreign exchange earnings. Israeli citrus exports are renowned for their quality and are marketed globally, reaching markets in Europe, North America, and Asia. The sustained success of citrus exports reflects ongoing improvements in cultivation methods, pest control, and post-harvest handling, ensuring that Israeli citrus remains competitive on the international stage. Israel has also emerged as one of the world’s leading exporters of greenhouse-grown food products, a sector that exemplifies the country’s advanced horticultural technology. The widespread use of controlled-environment agriculture, including greenhouses equipped with sophisticated climate control and irrigation systems, allows for year-round production of vegetables, herbs, and fruits. This technological edge enables Israel to supply high-quality produce to global markets, often during off-season periods, thereby commanding premium prices and establishing a niche in the competitive international agricultural trade. Beyond fruits and vegetables, Israel’s agricultural output includes significant production and export of flowers and cotton. The floriculture industry benefits from Israel’s favorable climate and technological innovations in greenhouse production, enabling the cultivation of a wide variety of ornamental plants and cut flowers for export. Cotton production, while more limited in scale, remains an important crop that supports the textile industry and contributes to export revenues. Together, these products diversify Israel’s agricultural portfolio and enhance its presence in international markets. Annually, Israel exports agricultural products exceeding $1.3 billion in value, encompassing both farm produce and agricultural inputs and technology. This substantial export volume underscores the sector’s dual role as a supplier of food products and as a hub for agricultural innovation. The export portfolio includes fresh and processed fruits and vegetables, flowers, cotton, and a growing range of high-tech agricultural equipment and solutions. Of the total agricultural exports, approximately $1.2 billion each year is attributed to agricultural inputs and technology. This segment includes drip irrigation systems, greenhouse equipment, water management technologies, seeds, fertilizers, pesticides, and advanced farming machinery. Israel’s leadership in these areas reflects decades of research and development aimed at maximizing efficiency and sustainability in agriculture, particularly in arid and semi-arid environments. Israeli technological innovations in agriculture and water management have been instrumental in establishing the country’s AgTech sector as a global leader. Breakthroughs such as drip irrigation, desalination, water recycling, and precision agriculture have provided Israeli companies with a competitive advantage, enabling them to offer solutions that address critical challenges faced by farmers worldwide. These innovations have not only transformed domestic agriculture but have also positioned Israel as a key exporter of agricultural technology. The success of Israeli AgTech companies extends beyond national borders, as they operate in numerous countries across diverse climatic and geographic conditions. By exporting technology, expertise, and services, these companies have expanded Israel’s influence in global agricultural markets, contributing to food security and sustainable farming practices worldwide. The international reach of Israeli AgTech underscores the sector’s dynamic nature and its role as a driver of economic growth and technological diplomacy.

Jerusalem Venture Partners (JVP), headquartered in Jerusalem, stands as one of Israel’s largest and most influential venture capital firms, playing a pivotal role in the development of the country’s high-tech industry. The firm has been instrumental in nurturing numerous startups and technological innovations, leveraging its strategic location and deep connections within Israel’s entrepreneurial ecosystem. Across the nation, Israel hosts over 100 active venture capital funds that collectively manage approximately US$10 billion in assets. This extensive network of venture capital firms operates nationwide, providing critical financial backing to a wide range of industries, particularly in technology and innovation sectors. The early 2000s marked a significant period for foreign investment in Israel’s venture capital market. In 2004, international foreign funds originating from various countries committed over 50% of the total dollars invested in Israel. This substantial influx of foreign capital underscored Israel’s growing reputation as a highly attractive destination for global investors seeking exposure to cutting-edge technologies and promising startups. The country’s venture capital sector had been experiencing rapid development since the early 1990s, evolving into a robust and dynamic industry. By that time, approximately 70 active venture capital funds were operating within Israel, including 14 international venture capital firms that had established offices locally to better tap into the burgeoning market. The growth of Israel’s venture capital and business-incubator industries has been closely linked to the financing and expansion of the country’s flourishing high-tech sector. These industries provided essential capital and support structures that enabled innovative companies to develop and scale their technologies. The year 2008 saw a notable increase in venture capital investment in Israel, which rose by 19% to reach a total of $1.9 billion. This growth reflected continued confidence in the Israeli high-tech ecosystem despite global economic uncertainties. A cornerstone in the history of Israel’s venture capital industry was the establishment of the Yozma Fund in the 1990s. This government-initiated fund was instrumental in jump-starting the venture capital market by encouraging private investment and fostering partnerships between Israeli entrepreneurs and international investors. Over time, the Yozma Fund helped raise approximately $8 billion, laying the foundation for a vibrant venture capital environment. Between 1991 and 2000, Israel witnessed a dramatic surge in private venture capital outlays, which increased nearly 60-fold from $58 million to $3.3 billion. This period also saw a significant rise in entrepreneurial activity, with the number of companies launched by Israeli venture funds expanding from 100 to 800. The rapid growth of Israel’s high-tech sector during the 1990s was reflected in its information-technology revenues, which soared from $1.6 billion to $12.5 billion between 1991 and 2000. This expansion positioned Israel as a global leader in technology innovation and commercialization. By 1999, Israel ranked second worldwide, trailing only the United States, in private equity capital invested as a share of its gross domestic product (GDP). The country also led the world in the proportion of its economic growth attributable to high-tech ventures, with these ventures accounting for an impressive 70% of overall economic expansion. The sustained growth of the high-tech sector was heavily financed by Israel’s vibrant venture capital industry, which comprised numerous successful private equity and venture capital firms dedicated to supporting early-stage and growth-stage companies. However, the global financial crisis of 2008 had a negative impact on the availability of venture capital within Israel. The tightening of financial markets and increased risk aversion among investors led to a contraction in capital flows to startups and emerging companies. Despite these challenges, Israeli mergers and acquisitions (M&A) activity in 2009 remained relatively robust, with a total of 63 deals valued at $2.54 billion. Although this represented a 7% decrease in deal value from 2008’s $2.74 billion across 82 deals, and a more pronounced 33% decline from 2007’s $3.79 billion across 87 deals, the continued M&A activity highlighted the ongoing interest of multinational corporations in acquiring Israeli high-tech firms. Many of these companies were sought after for their profitable technologies as well as their strong management and administrative personnel, which contributed to their attractiveness as acquisition targets. Israel’s financial services sector also benefits from the presence of major international investment banks, pension funds, and insurance companies that have established operations within the country. Prominent global institutions such as Goldman Sachs, Bear Stearns, Deutsche Bank, JP Morgan, Credit Suisse First Boston, Merrill Lynch, CalPERS, Ontario Teachers Pension Plan, and AIG have maintained a significant presence in Israel, facilitating capital flows and investment opportunities. Alongside traditional financial institutions, Israel has developed a small but rapidly growing hedge fund industry. Between 2007 and 2012, the number of active hedge funds in Israel doubled to 60, reflecting increasing sophistication and diversification within the country’s financial markets. During the period from 2006 to 2012, Israel-based hedge funds experienced a remarkable 162% increase in assets under management, reaching a total of $2 billion (₪8 billion). These funds employed approximately 300 people, highlighting the sector’s expanding footprint within the Israeli economy. The hedge fund industry has attracted growing international investor interest, particularly from the United States, as global investors seek to capitalize on Israel’s unique market opportunities and innovative financial products. In 2022, Tel Aviv was ranked 53rd on the Global Financial Centres Index, a ranking that evaluates the competitiveness and attractiveness of financial centers worldwide. Despite facing significant challenges in 2023, including war, legal reforms, and rising interest rates that contributed to market uncertainty, approximately 40% of companies traded on the Tel Aviv Stock Exchange (TASE) continued to pay dividends. This resilience was especially notable in key sectors such as energy, oil, gas, banking, and financial services, which maintained their dividend distributions even amid adverse conditions. The total dividends distributed to public shareholders in 2023 reached a record high of approximately 16.8 billion shekels, representing about 62% of the total dividends paid, up from 55% (15.8 billion shekels) in 2022. The remaining dividend amount was allocated to other stakeholders, reflecting a broad distribution of corporate earnings. The average dividend yield of exchange-listed companies in 2023 was approximately 2.9%, slightly higher than the 2.8% yield recorded in 2022. This dividend yield marked the highest return since 2017 and surpassed the previous year’s record, despite a roughly 9% decrease in the overall market value compared to 2022. The total dividend payout in 2023 was only about 5% lower than in 2022, underscoring the robustness of dividend payments even in the face of declining market valuations.

Science and technology have long constituted one of Israel’s most highly developed and industrialized sectors, playing a pivotal role in shaping the national economy. Over the decades, this sector has evolved into a cornerstone of economic activity, driving innovation, exports, and employment. The modern Israeli high technology ecosystem is highly optimized, characterized by a dense network of startups, multinational research centers, and academic institutions that collectively contribute to a substantial portion of the country’s economic output. This ecosystem thrives on a culture of innovation, robust government support, and a skilled workforce, enabling Israel to maintain a competitive edge in various advanced technological fields. Israel boasts a notably high percentage of its population engaged in scientific and technological inquiry, reflected in its research and development (R&D) expenditure relative to gross domestic product (GDP), which ranks among the highest worldwide. This substantial investment in R&D underscores the country’s commitment to fostering innovation and maintaining technological leadership. The density of scientific and technical personnel in Israel is particularly remarkable; there are approximately 140 scientists and technicians per 10,000 employees, a figure that significantly surpasses the 85 per 10,000 found in the United States and the 83 per 10,000 in Japan. This concentration of skilled professionals facilitates rapid technological advancement and supports a vibrant research community. In terms of scientific output, Israel ranks fourth globally in scientific activity when measured by the number of scientific publications per million citizens. This high level of scholarly productivity is indicative of the country’s strong emphasis on research and education. Moreover, Israel’s share of worldwide scientific articles is nearly ten times higher than its proportion of the global population, highlighting the disproportionate impact Israeli researchers have on the global scientific community. This prolific output spans a wide range of disciplines, reinforcing Israel’s reputation as a hub of cutting-edge research and innovation. The life sciences sector in Israel is particularly robust, hosting over 1,400 companies engaged in various subfields. Among these are approximately 300 pharmaceutical companies, 600 medical device manufacturers, 450 digital health firms, and 468 biotechnology enterprises. This extensive network reflects the country’s strength in biomedical research and its ability to translate scientific discoveries into commercial products. Israeli scientists, engineers, and technicians have made significant contributions across multiple fields, including the natural sciences, agricultural sciences, computer sciences, electronics, genetics, medicine, optics, and solar energy, as well as various engineering disciplines. These contributions have not only advanced scientific knowledge but also led to the development of innovative technologies with global applications. The population of Israel is recognized as one of the most technologically literate in the world, a factor that underpins the country’s dynamic high-tech sector. This literacy is supported by a strong educational system and a culture that values scientific inquiry and technological innovation. Israel has emerged as a major global hub for technology startups, possessing the second-largest number of startup companies worldwide, trailing only the United States. This vibrant startup ecosystem is fueled by a combination of entrepreneurial spirit, access to capital, and supportive infrastructure. As of 2013, Israel was creating approximately 200 new startups annually, a testament to the country’s ongoing commitment to fostering innovation. By 2019, the number of active startups operating across Israel had grown to nearly 7,000, illustrating the rapid expansion and diversification of the high-tech sector. This growth continued into 2021, when Israel was home to 79 tech unicorns—privately held startups valued at over $1 billion—of which 32 were headquartered within the country. The prominence of Israeli companies in the cybersecurity domain is particularly notable; over one-third of the world’s cybersecurity unicorns in 2021 were Israeli, underscoring the country’s leadership in this critical and rapidly evolving field. Israel also hosts nearly 400 research and development centers owned by multinational corporations, including global technology giants such as Google, Microsoft, and Intel. These centers serve as vital nodes of innovation, enabling the transfer of knowledge and technology between Israel and the global market. The country is recognized as a major semiconductor design hub, with numerous chip design centers operated by leading multinational firms. Israel’s semiconductor industry is regarded as one of the most advanced in the world, reflecting decades of investment in microelectronics and related technologies. In 2021, 37 multinational corporations were active in Israel’s semiconductor sector, highlighting the country’s importance in the global supply chain for advanced electronic components. Tel Aviv has played a central role in Israel’s high-tech development and has received international recognition for its technological influence. In 1998, Newsweek named Tel Aviv as one of the ten most influential technological cities worldwide, acknowledging its growing status as a center of innovation. The city’s reputation continued to rise in the following years; in 2012, Tel Aviv was ranked as the second-best city globally for high-tech startups, trailing only California. The following year, The Boston Globe also ranked Tel Aviv as the second-best city for business startups after Silicon Valley. More recently, in 2020, StartupBlink ranked Israel as having the third-best startup ecosystem globally, following the United States and the United Kingdom. These accolades reflect the city’s dynamic entrepreneurial environment, access to venture capital, and concentration of talent. Israel is frequently referred to as the “Start-Up Nation” and the “Silicon Valley of the Middle East,” labels that capture the country’s prolific and dynamic startup culture. These nicknames emphasize Israel’s reputation as a global leader in innovation and technology entrepreneurship. Several programs, such as TAVtech Ventures and the TAMID Group, facilitate exploration of Israel’s “Start-Up Nation” economy by entrepreneurs and investors, providing platforms for collaboration, mentorship, and investment. These initiatives help sustain the vibrant ecosystem by connecting emerging companies with resources and expertise. The country’s high-tech success is partly attributed to the widespread service in the Israel Defense Forces (IDF), which plays a unique role in developing talent that later fuels the high-tech industry. Many Israeli tech entrepreneurs and engineers gain critical skills and experience during their military service, particularly in elite intelligence and technology units. This pipeline of highly trained individuals contributes to the sector’s innovation capacity and entrepreneurial energy. Despite its successes, the Israeli high-tech industry has faced significant challenges, including a shortage of technology specialists. As of 2019, approximately 15% of high-tech positions remained unfilled, reflecting a substantial gap between demand and supply of skilled labor. The largest proportion of these unfilled positions—31%—were in software engineering specialties, encompassing areas such as DevOps, back-end development, data science, machine learning, and artificial intelligence. This shortage has exerted upward pressure on salaries for high-tech specialists in Israel, leading to substantial wage increases as companies compete to attract and retain talent. To address the talent gap, Israeli IT companies have increasingly turned to employing workers from abroad. Approximately 25% of the high-tech workforce in Israel consists of overseas hires, reflecting the sector’s reliance on global talent to sustain growth. The primary offshoring destinations for these workers are Ukraine, which accounts for 45% of the foreign workforce, and the United States, which represents 16%. This international recruitment strategy helps mitigate the domestic labor shortage while also fostering cross-border collaboration. Recognizing the need to expand the domestic talent pool, the Israeli Council for Higher Education launched a five-year program in 2017 aimed at increasing the number of graduates in computer science and engineering by 40%. This initiative seeks to enhance the capacity of academic institutions to train skilled professionals and to better align educational outcomes with industry needs. By investing in education and workforce development, Israel aims to sustain its technological leadership and address the challenges posed by rapid sectoral growth.

The Levant Basin, a geological formation situated in the Eastern Mediterranean region, contains several known oil and gas fields, as documented by the United States Energy Information Administration (EIA). This basin extends offshore from countries including Israel, Lebanon, Syria, and Cyprus, and has attracted considerable attention due to its hydrocarbon potential. The discovery of these fields has significant implications for the energy landscape of the region, promising to alter the traditional dynamics of energy supply and demand. The EIA’s identification of these resources underscores the strategic importance of the Levant Basin as a potential source of fossil fuels, particularly natural gas, which could reduce the region’s dependence on imports and enhance energy security. Since 1980, Israel’s consumption patterns of fossil fuel energy sources have undergone notable transformations, reflecting shifts in both domestic energy policy and global market conditions. During this period, coal consumption in Israel, which was virtually negligible at the beginning of the 1980s, began to increase steadily. This rise in coal use was driven by the country’s efforts to diversify its energy mix and to meet growing electricity demand through more cost-effective and reliable fuel sources. Coal-fired power plants became a cornerstone of Israel’s electricity generation infrastructure, contributing significantly to the national grid. In contrast, natural gas consumption remained minimal for much of this period, with near-zero usage recorded as recently as 2003. However, since the early 2000s, natural gas consumption has experienced a steady and substantial increase, spurred by the discovery of domestic natural gas reserves and a global shift toward cleaner-burning fuels. The gradual transition from coal to natural gas has been part of Israel’s broader strategy to reduce environmental pollution and enhance energy efficiency. Historically, Israel has depended heavily on external imports to satisfy its energy requirements, a reliance that has shaped the country’s economic and geopolitical considerations. In 2009, expenditures on energy imports accounted for more than 5% of Israel’s gross domestic product (GDP), reflecting the significant financial burden associated with securing sufficient energy supplies from abroad. This dependence on imported energy sources, particularly crude oil and coal, exposed Israel to vulnerabilities related to price volatility, supply disruptions, and geopolitical tensions in the Middle East and beyond. The high cost of energy imports also underscored the urgency of developing domestic energy resources and diversifying the energy portfolio to enhance national energy security and economic stability. The transportation sector in Israel has traditionally relied predominantly on gasoline and diesel fuel to meet its energy needs. These petroleum-based fuels have powered the majority of vehicles on Israeli roads, including private cars, commercial trucks, and public transportation fleets. The reliance on liquid fuels for transportation has contributed to Israel’s overall demand for imported crude oil and refined petroleum products. Despite ongoing efforts to promote alternative fuels and electric vehicles, gasoline and diesel have remained the primary energy sources for transportation, reflecting both infrastructure constraints and consumer preferences. Electricity production in Israel has been largely dependent on imported coal, which has served as the main fuel for power generation plants across the country. Coal-fired power stations have provided the bulk of Israel’s electricity supply, benefiting from the relatively low cost and established technology associated with coal combustion. This reliance on imported coal has made Israel vulnerable to fluctuations in global coal prices and supply chain disruptions. The use of coal in electricity generation has also raised environmental concerns due to emissions of greenhouse gases and other pollutants, prompting ongoing discussions about the need to transition to cleaner energy sources. As of 2013, Israel was importing approximately 100 million barrels of oil annually to meet its domestic consumption needs. This substantial volume of oil imports reflected the country’s limited domestic crude oil production and the high demand for petroleum products across various sectors, including transportation, industry, and electricity generation. The scale of oil imports underscored Israel’s dependence on international oil markets and the strategic importance of maintaining secure and diversified supply routes. The reliance on imported oil also had significant economic implications, influencing trade balances and energy pricing within the country. Israel’s domestic crude oil reserves are negligible, which has necessitated a heavy reliance on imports to satisfy the nation’s oil requirements. Despite exploration efforts over several decades, the country has not been able to develop significant indigenous crude oil production. This lack of domestic oil resources has shaped Israel’s energy policy and economic planning, compelling the government to prioritize the development of alternative energy sources and to secure stable import agreements. The absence of substantial crude oil reserves has also heightened the strategic imperative to develop domestic natural gas resources as a means of reducing overall energy import dependence. In contrast to its limited crude oil reserves, Israel possesses domestic natural gas resources that have become increasingly significant since their discovery in larger quantities beginning in 2009. Prior to this period, exploration efforts for natural gas in Israeli territorial waters had been largely unsuccessful, with only modest finds that did not substantially impact the country’s energy landscape. The breakthrough came with the discovery of major offshore gas fields such as Tamar and Leviathan, which contain vast quantities of natural gas capable of meeting a substantial portion of Israel’s domestic energy demand. The development of these natural gas fields has transformed Israel’s energy sector by providing a reliable, cleaner-burning fuel source that supports electricity generation, industrial use, and potentially export markets. The exploitation of domestic natural gas resources has enhanced Israel’s energy independence, reduced its reliance on imported fuels, and positioned the country as an emerging player in the regional energy market.

Until the early 2000s, natural gas consumption in Israel remained minimal, indicating that this energy resource had limited utilization within the country during that period. The Israeli energy sector primarily relied on other sources such as coal, oil, and imported electricity, with natural gas playing a negligible role in the national energy mix. This limited use was largely due to the absence of domestic natural gas reserves and the lack of infrastructure to support widespread adoption of natural gas for industrial, commercial, or residential purposes. Consequently, natural gas was not considered a significant component of Israel’s energy strategy at the time, and consumption volumes were correspondingly low. In the late 1990s, the Israeli government undertook a strategic shift aimed at promoting the use of natural gas as a key energy resource. This policy change was motivated by several factors, including the environmental benefits associated with natural gas compared to other fossil fuels, such as lower emissions of pollutants and greenhouse gases. Additionally, natural gas offered cost advantages due to its efficiency and potential for price stability relative to oil and coal. Another critical objective was to diversify Israel’s energy resources, reducing dependence on imported oil and coal and enhancing energy security. This strategic decision marked the beginning of a concerted effort to integrate natural gas more fully into Israel’s energy infrastructure and consumption patterns. At that time, Israel did not possess domestic natural gas sources, necessitating reliance on imports to meet any anticipated increase in demand. The government and energy planners expected that natural gas would be imported primarily in the form of liquefied natural gas (LNG) shipped from overseas suppliers. LNG imports would require the development of specialized regasification terminals to convert the liquefied gas back into its gaseous state for distribution and use. In addition to LNG imports, plans were made to establish a pipeline connection with Egypt, which was anticipated to facilitate the direct transfer of natural gas to Israel. This pipeline was envisioned as a critical component of the country’s natural gas import strategy, providing a steady and reliable supply from a neighboring country. The pipeline from Egypt, initially conceptualized as part of Israel’s natural gas import strategy, eventually materialized as the Arish–Ashkelon pipeline. This pipeline became a vital conduit for natural gas transfer from Egypt to Israel, enabling the country to access Egyptian natural gas fields and reduce reliance on more costly or logistically complex LNG imports. The Arish–Ashkelon pipeline played a significant role in Israel’s early natural gas infrastructure, supporting the country’s growing consumption needs and facilitating the transition toward cleaner energy sources. Its establishment marked a milestone in regional energy cooperation and underscored the strategic importance of natural gas in Israel’s evolving energy landscape. In tandem with import infrastructure development, Israel planned for the Israel Electric Corporation (IEC) to construct several natural gas-powered power plants. These facilities were intended to increase the efficiency of domestic electricity generation by utilizing natural gas, which burns cleaner and more efficiently than coal or oil. The shift toward natural gas-fired power plants aimed to reduce the environmental impact of electricity production, lower operational costs, and enhance the reliability of the national grid. By expanding the use of natural gas in power generation, Israel sought to modernize its energy sector and align with global trends favoring cleaner energy technologies. The government also envisioned the establishment of a national gas distribution grid to supply natural gas throughout Israel. This infrastructure would facilitate the widespread availability of natural gas to residential, commercial, and industrial consumers, thereby encouraging broader adoption of this energy source. Alongside the distribution network, plans were made to develop an LNG import terminal, which would serve as a critical hub for receiving and processing liquefied natural gas shipments from overseas. The combination of import terminals, pipelines, and distribution grids formed the backbone of Israel’s strategy to integrate natural gas into its energy system comprehensively. Natural gas usage in Israel increased steadily over the years following these strategic initiatives, reflecting the successful expansion of infrastructure and growing demand. Consumption figures, measured in billion cubic meters (BCM) per year, illustrate this upward trajectory. In 2004, natural gas consumption stood at 1.2 BCM, rising to 1.6 BCM in 2005 and 2.3 BCM in 2006. The upward trend continued with 2.7 BCM consumed in 2007, 3.7 BCM in 2008, and 4.2 BCM in 2009. By 2010, consumption had reached 5.2 BCM, demonstrating a more than fourfold increase from 2004 levels within six years. The growth in natural gas consumption accelerated further in the following years. By 2014, Israel’s natural gas consumption had climbed to 7.6 BCM, and by 2016, it reached 9.5 BCM. Projections for subsequent years indicated continued expansion, with consumption expected to reach 10.1 BCM in 2018 and 11.1 BCM in 2020. Further forecasts anticipated consumption of 11.7 BCM in 2022, 13 BCM in 2024, 14.3 BCM in 2026, 15.3 BCM in 2028, and ultimately 16.8 BCM by 2030. These figures underscore a consistent and robust upward trend in natural gas consumption, reflecting Israel’s increasing reliance on this energy source as part of its broader energy strategy. The sustained growth in natural gas usage over this period can be attributed to several factors, including the successful development of domestic natural gas fields discovered in the late 2000s, which reduced dependence on imports. The Tamar and Leviathan offshore gas fields, discovered in 2009 and 2010 respectively, significantly bolstered Israel’s natural gas supply, enabling the country to transition from an importer to a potential exporter of natural gas. The expansion of the national gas distribution grid and the commissioning of new natural gas-fired power plants further supported the increasing demand. Additionally, government policies promoting cleaner energy sources and the economic advantages of natural gas contributed to its growing share in Israel’s energy consumption mix. Overall, the evolution of natural gas consumption in Israel from minimal levels in the early 2000s to projected figures exceeding 16 BCM by 2030 reflects a transformative shift in the country’s energy landscape. This shift has been driven by strategic government initiatives, infrastructure development, regional cooperation, and the exploitation of domestic natural gas resources. The integration of natural gas into Israel’s energy system has enhanced energy security, reduced environmental impacts, and supported economic growth, positioning natural gas as a cornerstone of the nation’s energy future.

In 2000, a significant natural gas field was discovered offshore near Ashkelon, possessing a capacity of approximately 33 billion cubic meters (BCM), equivalent to 1,200 billion cubic feet (BCF). This discovery marked an important milestone in Israel’s energy sector, as it provided a domestic source of natural gas that had previously been limited. Commercial production from this Ashkelon field commenced in 2004, contributing to the country’s energy supply and reducing reliance on imported fuels. The field’s development involved the installation of offshore infrastructure and pipelines designed to transport the extracted gas to onshore processing facilities, facilitating its distribution within Israel’s energy network. By 2014, however, the Ashkelon offshore gas field was nearing depletion, a development that occurred earlier than initially projected. The accelerated exhaustion of reserves was largely attributed to intensified extraction efforts undertaken to compensate for the abrupt loss of imported Egyptian gas supplies. This disruption followed the political upheaval and unrest associated with the fall of the Mubarak regime in Egypt in 2011, which led to the suspension of gas exports to Israel. The increased demand on the Ashkelon field during this period placed additional strain on its reserves, hastening its decline and underscoring the vulnerability of Israel’s energy security to regional geopolitical events. In the same year as the Ashkelon discovery, 2009 witnessed the identification of a far more substantial natural gas field named Tamar. Located in deep waters approximately 90 kilometers (60 miles) west of Haifa, Tamar’s proven reserves were estimated at 223 BCM (7.9 trillion cubic feet), with total reserves, including probable quantities, reaching 307 BCM (10.8 trillion cubic feet). This discovery represented a transformative development for Israel’s energy landscape, offering a sizeable and long-term source of natural gas. The Tamar field lies within a complex underwater geological formation, requiring advanced offshore drilling technologies and significant investment to develop the necessary extraction infrastructure. Also in 2009, a smaller gas field was discovered closer to the Israeli coastline, with reserves estimated at 15 BCM (530 billion cubic feet). While less substantial than Tamar, this field nonetheless contributed to the diversification of Israel’s natural gas portfolio and provided additional domestic supply options. Its proximity to shore facilitated relatively easier access and development compared to the deeper water fields, enabling quicker integration into the national energy grid. From 2010 onward, extensive 3D seismic surveys and exploratory drilling confirmed the presence of the Leviathan gas deposit, which emerged as the largest known offshore gas field in Israel’s territorial waters. Estimated at 621 BCM (21.9 trillion cubic feet), Leviathan is situated in a large underwater geological formation adjacent to the Tamar field. The discovery of Leviathan significantly expanded Israel’s natural gas reserves and positioned the country as a potential regional energy exporter. The field’s development involved complex engineering challenges due to its depth and scale, necessitating coordinated efforts among multiple stakeholders and substantial capital investment. Following four years of development, the Tamar field commenced commercial production on 30 March 2013. The initiation of production was strategically important, as it aimed to bolster the Israeli economy, which had suffered losses exceeding ₪20 billion (Israeli new shekels) between 2011 and 2013. These economic setbacks were primarily due to disrupted gas supplies from Egypt, which had previously been a major source of natural gas for Israel. The Tamar field’s operationalization restored a reliable domestic gas supply, reducing dependence on volatile imports and stabilizing energy prices within the country. The disruption of Egyptian gas supplies stemmed from political unrest in Egypt and the subsequent decision by the Egyptian government to indefinitely suspend its gas supply agreement with Israel. This suspension forced Israel, along with neighboring Jordan, to seek alternative energy sources, often resorting to importing more expensive and environmentally polluting liquid heavy fuels. The reliance on such fuels increased energy costs and contributed to higher emissions, exacerbating economic and environmental challenges. The Tamar field’s production alleviated this energy crisis by providing a stable and cleaner source of natural gas, thereby enhancing energy security and environmental sustainability in the region. In the wake of Tamar’s successful production start, Jordan entered into a landmark gas supply agreement with Israel valued at US$10 billion over 15 years. This agreement involved the delivery of 45 BCM of natural gas from the Leviathan field, with supply scheduled to begin in late 2019. The deal promised significant economic benefits for Jordan, including estimated annual savings of US$600 million in energy costs. This arrangement not only strengthened energy ties between the two countries but also underscored the strategic importance of Israel’s offshore gas fields in regional energy dynamics and cooperation. Further expanding regional energy collaboration, in 2018 the owners of the Tamar and Leviathan fields announced ongoing negotiations with a consortium of Egyptian firms for the supply of up to 64 BCM of natural gas over a 10-year period. Valued at up to US$15 billion, this potential agreement represented a significant commercial opportunity and a step toward normalizing energy trade relations between Israel and Egypt. The deal would enable Egypt to leverage its existing liquefied natural gas (LNG) export infrastructure to re-export Israeli gas to global markets, while providing Israel with a stable customer for its surplus gas production. In early 2012, recognizing the strategic importance of its natural gas wealth, the Israeli cabinet announced plans to establish a sovereign wealth fund known as “the Israeli Citizens’ Fund.” This fund was designed to manage revenues generated from the country’s natural gas resources, ensuring that the economic benefits derived from these assets would be preserved and distributed equitably among Israeli citizens. The establishment of the fund reflected a broader trend among resource-rich countries to institutionalize the management of natural resource income to promote fiscal stability, intergenerational equity, and sustainable economic development. Prior to these major discoveries, several smaller gas fields had been identified and developed. The Noa North gas field, discovered in 1999, began production in 2012 and continued until 2014. Originally estimated to contain 50 billion cubic feet (1.4 billion cubic meters) of natural gas, the field is now depleted. Despite its relatively modest size, Noa North contributed to Israel’s early domestic gas supply and provided valuable experience in offshore gas extraction. Similarly, the Mari-B gas field was discovered in 2000 and produced natural gas from 2004 until 2015. With an original estimated size of 1 trillion cubic feet (28 billion cubic meters), Mari-B was a significant early contributor to Israel’s natural gas production. Over its operational lifespan, the field supported the country’s energy needs until its reserves were exhausted, after which attention shifted to larger fields such as Tamar and Leviathan. The Tamar field, discovered in 2009 and beginning production in 2013, remains one of Israel’s most important gas assets, with an estimated size of 10.8 trillion cubic feet (310 billion cubic meters). Its development marked a turning point in Israel’s energy independence and export potential. Alongside Tamar, the Dalit field was also discovered in 2009; however, it has not yet entered production. Dalit’s estimated reserves stand at 700 billion cubic feet (20 billion cubic meters), representing a moderate-sized resource that could supplement Israel’s gas supply in the future. The Leviathan field, discovered in 2010 and scheduled to start production in 2019, is the largest among Israel’s offshore gas fields, with an estimated size of 22 trillion cubic feet (620 billion cubic meters). Its development required advanced technological solutions and significant investment but promised to transform Israel into a regional energy hub. The field’s production capacity and export potential have attracted considerable international interest and have implications for regional energy security. Additional discoveries include the Dolphin field, identified in 2011, which has an estimated size of 81.3 billion cubic feet (2.30 billion cubic meters) but remains undeveloped and not in production. The Tanin field, found in 2012, is estimated to contain between 1.2 and 1.3 trillion cubic feet (34 to 37 billion cubic meters) of natural gas. Like Dolphin, Tanin has yet to be brought into production, but its reserves add to the overall resource base available for future exploitation. The Karish field, discovered in 2013, began production in 2022 and holds an estimated size ranging from 2.3 to 3.6 trillion cubic feet (65 to 102 billion cubic meters). Its development further expanded Israel’s offshore gas production capacity and contributed to the diversification of the country’s energy supply. Karish’s relatively recent entry into production reflects ongoing efforts to capitalize on Israel’s offshore gas potential and to meet both domestic demand and export commitments. Collectively, these discoveries and developments have reshaped Israel’s energy sector over the past two decades, transitioning the country from a net energy importer to a significant producer and exporter of natural gas. The exploitation of offshore gas fields has enhanced Israel’s energy security, generated substantial economic benefits, and fostered new regional energy partnerships, while also presenting challenges related to resource management, environmental protection, and geopolitical considerations.

Since the establishment of the State of Israel, the Israel Electric Corporation (IEC), a state-owned utility company, maintained an effective monopoly over the generation of electrical power within the country through the mid-2010s. As the primary entity responsible for electricity production, transmission, and distribution, the IEC played a central role in shaping Israel’s energy landscape. In 2010 alone, the IEC sold a total of 52,037 gigawatt-hours (GWh) of electricity, reflecting the scale of its operations and the growing demand for power in the country. Despite this substantial output, Israel’s electricity sector faced significant challenges related to system reliability and reserve margins, largely due to the country’s unique status as an “electricity island.” Israel’s electrical grid was isolated from those of neighboring countries, a condition that contributed to persistently low operating reserves up until the mid-2010s. Unlike many nations that benefit from interconnected regional grids, which allow for the importation of electricity during periods of peak demand or unexpected outages, Israel’s grid remained unlinked to the power systems of adjacent states. This isolation was primarily the result of political complexities and security considerations, as well as the relatively underdeveloped state of electricity infrastructure in neighboring Jordan and Egypt. Both Jordan and Egypt faced their own domestic energy challenges, with per-capita electric generation rates amounting to less than one-fifth of Israel’s, underscoring their limited capacity to export surplus power or support regional grid integration. Despite the low operating reserves, Israel managed to maintain sufficient generation and transmission capacity to meet its domestic electricity needs. The IEC’s infrastructure and operational strategies ensured that rolling blackouts were rare occurrences, even during periods of extreme demand such as heatwaves or peak industrial activity. This resilience was achieved through careful planning, maintenance, and incremental capacity additions, although the narrow margin of reserve capacity remained a concern for policymakers and industry stakeholders alike. Beginning in the latter half of the 2000s, the Israeli government undertook a series of initiatives aimed at bolstering electricity supply and increasing operating reserves, while simultaneously seeking to reduce the IEC’s monopoly in order to foster competition within the electricity market. Recognizing the risks associated with a single dominant provider and the benefits of diversifying energy sources and producers, the government implemented policies that encouraged private sector participation and investment in power generation. These measures included directives for the IEC to construct several new power stations to expand capacity, alongside regulatory frameworks designed to facilitate the entry of independent power producers (IPPs) into the market. By 2015, these efforts had begun to reshape the structure of Israel’s electricity generation sector. The IEC’s share of the total installed national electricity generation capacity had decreased to approximately 75%, a notable reduction from its previous near-total dominance. At this time, the IEC owned about 13.6 gigawatts (GW) of installed capacity, reflecting both its continued centrality and the growing presence of alternative producers. Since 2010, independent power producers had constructed three new gas-fired combined cycle power stations with a combined capacity of approximately 2.2 GW, contributing significantly to the diversification of the generation mix and the enhancement of system flexibility. In addition to these large-scale facilities, industrial entities within Israel developed on-premises cogeneration plants, collectively producing about 1 GW of electricity. These cogeneration facilities, which simultaneously generate electricity and useful heat, were licensed to sell surplus electricity to the national grid at competitive rates, further augmenting the country’s electricity supply and promoting efficient energy use within the industrial sector. This integration of distributed generation resources represented a shift towards a more decentralized and dynamic electricity system. Complementing these developments, Israel invested in energy storage and renewable energy projects to improve grid stability and sustainability. A 300 megawatt (MW) pumped storage facility was under construction, designed to provide valuable grid balancing services by storing excess energy during low demand periods and releasing it during peak demand. Additionally, two more pumped storage projects were in the planning stages, alongside several solar power plants aimed at increasing the share of renewable energy in the generation mix. These initiatives reflected Israel’s commitment to modernizing its electricity infrastructure and reducing reliance on fossil fuels. Looking beyond national borders, Israel and Cyprus explored the possibility of implementing the EuroAsia Interconnector project, an ambitious plan to lay a 2,000 MW high-voltage direct current (HVDC) undersea power cable connecting Israel, Cyprus, and Greece. This interconnection would link Israel’s grid to the broader European power network, enhancing operating reserves and grid reliability by enabling electricity imports and exports across the region. If realized, the EuroAsia Interconnector would not only strengthen Israel’s energy security but also open new opportunities for the export of surplus electricity, positioning Israel as a regional energy hub. By 2016, Israel’s electricity production reached 67.2 GWh, with a notable shift in the fuel mix marking a significant milestone in the country’s energy transition. For the first time, natural gas surpassed coal as the dominant fuel source for electricity generation, accounting for 55.2% of total production compared to coal’s 43.8%. This transition reflected broader trends in the global energy sector towards cleaner-burning fuels and was facilitated by the development of domestic natural gas resources, which provided a more economical and environmentally friendly alternative to coal. The composition of Israel’s electricity generation capacity at full output in 2010 illustrated the diversity of fuel sources utilized at the time. Coal-fired plants represented 39.7% of the total capacity, closely matched by natural gas-fired plants at 39.8%. Fuel oil and diesel contributed smaller shares, at 3.4% and 18.9% respectively. However, when examining actual electricity generation by fuel source in 2010, coal accounted for a larger proportion of output at 61.0%, while natural gas contributed 36.6%. Fuel oil and diesel were minor contributors, generating 0.9% and 1.5% of total electricity respectively. This discrepancy between capacity and generation shares reflected operational factors such as fuel costs, plant efficiency, and dispatch priorities. Overall, Israel’s electricity sector during this period was characterized by a gradual but steady transformation from a monopolistic, coal-heavy system towards a more diversified and competitive market with increasing reliance on natural gas and renewable energy sources. The combination of government policy initiatives, private sector involvement, infrastructure investments, and regional cooperation efforts laid the groundwork for enhanced energy security, improved environmental performance, and greater integration into the regional and global electricity markets.

The Negev Desert serves as the central hub for Israel’s solar research and development industry, hosting key institutions such as the National Solar Energy Center. This region, characterized by its arid climate and abundant sunshine, provides an ideal environment for solar energy experimentation and innovation. Within the Negev, the Arava Valley stands out as Israel’s sunniest area, receiving the highest annual solar radiation levels in the country. This natural advantage has made the Arava Valley a focal point for both governmental and private sector initiatives aimed at harnessing solar power, enabling extensive research into photovoltaic technologies and solar thermal applications tailored to Israel’s unique climatic conditions. The development of solar power in Israel traces its origins back to the formative years of the state, reflecting an early recognition of the potential for solar energy to address the country’s energy needs. During the initial decades following Israel’s establishment in 1948, energy shortages were a persistent challenge due to limited access to conventional fossil fuels and the geopolitical complexities of the region. This context spurred interest in alternative energy sources, with solar power emerging as a particularly promising avenue given Israel’s geographical advantage. The early efforts laid the groundwork for a sustained national commitment to solar energy research and deployment, which would evolve significantly over the subsequent decades. In the 1950s, Levi Yissar emerged as a pioneering figure in the development of solar water heating technology in Israel. Confronted with the pressing need to alleviate energy shortages during the country’s nascent years, Yissar focused on creating practical and cost-effective solutions for domestic water heating. His work involved designing solar water heaters that could be manufactured and installed widely, thereby reducing dependence on imported fuels and lowering household energy costs. These early innovations not only addressed immediate energy challenges but also demonstrated the viability of solar thermal technology in Israel’s climate, setting a precedent for future advancements in the sector. By 1967, the adoption of solar water heating systems had gained significant traction among Israeli households. Approximately one in every twenty homes in Israel utilized solar water heaters, reflecting a growing acceptance of the technology within the domestic energy landscape. Nationwide, a total of 50,000 solar water heaters had been sold by this time, indicating a robust market presence and a degree of normalization in the use of solar thermal systems. This widespread uptake was facilitated by both government incentives and public awareness campaigns that highlighted the economic and environmental benefits of solar water heating, contributing to its integration into everyday life across diverse communities. The 1973 oil crisis served as a pivotal moment for Israel’s solar energy sector, acting as a catalyst for intensified innovation and investment. The sudden and severe disruption of oil supplies underscored the vulnerability of relying on imported fossil fuels and heightened the urgency to develop indigenous energy sources. In response, Israeli researchers and policymakers accelerated efforts to improve solar technologies, seeking to enhance efficiency, reduce costs, and expand applications beyond water heating. This period marked a surge in governmental support for solar energy projects, including increased funding for research institutions and the establishment of regulatory frameworks aimed at promoting renewable energy adoption. During the aftermath of the oil crisis, Harry Zvi Tabor emerged as a seminal figure in Israel’s solar industry, earning recognition as its founding father. Tabor’s contributions centered on the development of a highly effective prototype solar water heater that combined innovative design with practical functionality. His work involved refining the solar collector to maximize heat absorption and improve durability, thereby creating a system that could be mass-produced and widely deployed. The prototype embodied a significant technological breakthrough, addressing previous limitations and setting new standards for performance and reliability in solar thermal applications. The solar water heater prototype developed by Harry Zvi Tabor achieved remarkable success and became a cornerstone of Israel’s domestic energy infrastructure. Today, over 90% of Israeli homes utilize solar water heating systems based on or derived from Tabor’s original design, reflecting near-universal adoption and integration into residential energy consumption patterns. This widespread use underscores the system’s effectiveness in reducing reliance on conventional energy sources, lowering household energy expenses, and contributing to national energy security. The prevalence of solar water heaters in Israel also exemplifies the country’s leadership in solar technology deployment and serves as a model for renewable energy adoption worldwide.

Israel possesses a substantial industrial capacity characterized by a well-developed chemical industry that is primarily oriented toward export markets. This sector has evolved into a significant component of the national economy, leveraging the country’s unique geographic and geological advantages to produce a diverse range of chemical products. The chemical manufacturing plants are strategically distributed across several key locations, including Ramat Hovav, the Haifa Bay area, and near the Dead Sea. This geographic dispersion facilitates efficient raw material sourcing, production, and export logistics, enabling Israel to maintain a competitive edge in global chemical markets. Among the most prominent entities in Israel’s chemical industry is Israel Chemicals Ltd. (ICL), one of the country’s largest fertilizer and chemical companies. ICL operates several subsidiaries, with Dead Sea Works located in Sdom standing out as a major global player. Dead Sea Works ranks as the world’s fourth-largest producer and supplier of potash products, a critical input for agricultural fertilizers. The company capitalizes on the mineral-rich environment of the Dead Sea region, where high concentrations of minerals allow for economically viable extraction and processing. Beyond potash, Dead Sea Works diversifies its product portfolio by manufacturing magnesium chloride, industrial salts, de-icers, bath salts, table salt, and raw materials used in the cosmetic industry. This diversification not only broadens the company’s market reach but also enhances its resilience against fluctuations in any single product category. The manufacturing sector in Israel extends well beyond chemicals, encompassing a broad industrial base that includes metals, machinery, electrical equipment, construction materials, consumer goods, textiles, and food processing. This diversity reflects the country’s efforts to build a multifaceted industrial economy capable of meeting both domestic needs and international demand. The production of metals and machinery supports various downstream industries, while the electrical equipment sector benefits from Israel’s growing expertise in electronics and high technology. Construction materials and consumer goods manufacturing contribute to the domestic market’s infrastructure and consumption, whereas textiles and food processing represent traditional sectors that have adapted to modern industrial practices. Within the machinery and equipment manufacturing segment, Israel has developed a notable specialization in high-tech and precision products. This includes the production of computer equipment, medical devices, agricultural machinery, and robots, highlighting the country’s commitment to technological innovation and diversification. The medical device industry, in particular, has gained international recognition for its advanced diagnostic and therapeutic technologies, while agricultural machinery production supports Israel’s efficient and technologically advanced farming sector. Robotics manufacturing further underscores the integration of cutting-edge technology into industrial production, positioning Israel as a pioneer in automation and intelligent machinery. Israel also maintains a successful semiconductor device fabrication industry, which plays a pivotal role in the country’s high-tech industrial output. Several semiconductor manufacturing facilities operate within the country, producing a range of components essential for electronics, telecommunications, and computing industries. This sector benefits from Israel’s strong research and development infrastructure, skilled workforce, and close ties with global technology companies. The semiconductor industry not only contributes significantly to exports but also supports the domestic development of advanced electronic systems and devices. A cornerstone of Israel’s industrial manufacturing landscape is Israel Aerospace Industries (IAI), one of the country’s largest employers and a leading producer of aviation, space, and defense products. IAI’s extensive product portfolio includes military aircraft, satellites, missile systems, and advanced avionics, reflecting Israel’s strategic emphasis on defense technology and aerospace innovation. In 2017, IAI reported an order backlog valued at 11.4 billion US dollars, underscoring the company’s robust demand and its critical role in both domestic defense and international markets. The company’s capabilities extend from design and manufacturing to integration and maintenance, making it a comprehensive aerospace and defense contractor. In addition to IAI, numerous other aerospace companies operate within Israel, primarily serving as sub-suppliers specializing in machining, electronic systems and components, and composite materials. These firms contribute to the aerospace supply chain by providing precision parts, advanced electronics, and lightweight materials essential for modern aircraft and space systems. The specialization of these companies supports the broader aerospace industry’s efficiency and innovation, enabling Israel to maintain a competitive position in global aerospace manufacturing. Israel has also established itself as a major manufacturer and exporter of unmanned aerial vehicles (UAVs), carving out a significant presence in the global UAV market. Israeli UAVs are widely recognized for their advanced technology, reliability, and versatility, finding applications in military, security, and civilian sectors worldwide. The country’s leadership in UAV development reflects its broader strengths in aerospace engineering, electronics, and defense technology, and has positioned Israeli companies as key players in an expanding international market. The pharmaceutical industry in Israel is notable for its scale and global reach, with Teva Pharmaceutical Industries standing out as one of the world’s largest pharmaceutical companies. As of 2011, Teva employed approximately 40,000 people, reflecting its status as a major employer and industrial enterprise within the country. The company specializes in the production of generic and proprietary pharmaceuticals, as well as active pharmaceutical ingredients (APIs), enabling it to serve diverse markets and healthcare needs. Teva is recognized as the largest generic drug manufacturer globally and ranks among the top 15 pharmaceutical companies worldwide, highlighting its significant influence on the global pharmaceutical landscape. Israel’s shipbuilding industry is represented primarily by Israel Shipyards, which operates one of the largest shipbuilding and repair facilities in the Eastern Mediterranean. This facility supports the construction and maintenance of a wide range of vessels, including merchant ships and other civilian watercraft. In addition to shipbuilding, Israel Shipyards manufactures machinery for ports and heavy industries, serving the civilian market with essential infrastructure equipment. The company also builds naval vessels for defense purposes, integrating advanced technologies to meet the specific requirements of the Israeli Navy and other clients. This dual focus on civilian and military shipbuilding underscores the strategic importance of the maritime sector within Israel’s industrial manufacturing framework.

Israel has established itself as one of the world’s three principal hubs for polished diamonds, sharing this distinction with Belgium and India. These three countries dominate the global diamond industry, each playing a critical role in the cutting, polishing, and trading of diamonds. Israel’s prominence in this sector is rooted in its advanced technological capabilities, skilled workforce, and strategic geographic location, which have collectively fostered a robust diamond industry that caters to international markets. The country’s diamond industry is characterized by sophisticated manufacturing processes and a well-developed export infrastructure, enabling it to maintain a competitive edge alongside the traditional centers of Antwerp in Belgium and Surat in India. In 2012, the Israeli diamond industry experienced a significant downturn, reflected in a sharp decline in net polished diamond exports. These exports fell by 22.8%, dropping from $7.2 billion in 2011 to $5.56 billion in 2012. This decline was indicative of broader global economic challenges that affected demand for luxury goods, including diamonds. The contraction in exports underscored the vulnerability of Israel’s diamond trade to fluctuations in international markets, particularly during periods of economic uncertainty. The reduction in polished diamond exports had a notable impact on the country’s trade balance and highlighted the sector’s sensitivity to external economic conditions. Alongside the decline in polished diamond exports, Israel also saw a substantial decrease in net exports of rough diamonds during the same period. In 2012, these exports fell by 20.1%, totaling $2.8 billion. Rough diamonds are the uncut stones that serve as raw material for the polishing and cutting processes carried out within Israel’s diamond industry. The decrease in rough diamond exports suggested a contraction in the upstream segment of the diamond trade, which is closely linked to the downstream polished diamond market. This decline reflected reduced global demand and disruptions in the supply chain, further exacerbating the challenges faced by the Israeli diamond sector. The net exports of polished diamonds experienced an even steeper decline in 2012, decreasing by 24.9% to reach $4.3 billion. This figure represented the value of polished diamonds that Israel sold to international markets after accounting for imports. The sharp fall in polished diamond exports was a direct consequence of diminished consumer demand in key markets, as well as increased competition from other diamond centers. The decline also mirrored broader trends in the luxury goods market, where economic uncertainty and reduced consumer spending led to lower sales volumes. The contraction in polished diamond exports had significant repercussions for the Israeli economy, given the sector’s role as a major source of foreign currency earnings and employment. In addition to the declines in exports, Israel’s net imports of rough diamonds also experienced a downturn in 2012, dropping by 12.9% to a total of $3.8 billion. The import of rough diamonds is a crucial component of Israel’s diamond industry, as these stones are processed domestically to produce polished diamonds for export. The reduction in rough diamond imports indicated a slowdown in the industry’s input supply, reflecting both decreased demand for cutting and polishing services and a cautious approach by traders amid uncertain market conditions. This contraction in imports further highlighted the interconnectedness of the global diamond supply chain and the impact of external economic factors on Israel’s diamond trade. The challenges faced by Israel’s diamond industry in 2012 were closely linked to the broader economic environment, particularly the effects of the Great Recession. The Eurozone and the United States, two of Israel’s most important trading partners, were especially hard hit by the global financial crisis, leading to reduced consumer spending and a decline in demand for luxury goods such as diamonds. The economic difficulties in these regions translated into lower orders for polished diamonds, which in turn affected Israel’s export volumes and revenues. The recession underscored the vulnerability of the diamond industry to macroeconomic shocks and the importance of diversified markets and resilient supply chains. The United States has historically been the largest export market for Israeli polished diamonds, accounting for 36% of the country’s overall polished diamond exports. This dominant share reflects the strong commercial ties between Israel and the U.S., as well as the significant demand for diamonds in the American market, which is one of the world’s largest consumers of luxury jewelry. The U.S. market’s importance to Israel’s diamond industry is underscored by the presence of numerous American diamond traders and retailers who source polished stones from Israeli manufacturers. The reliance on the U.S. market also means that fluctuations in American consumer confidence and economic conditions have a direct impact on Israel’s diamond export performance. Following the United States, Hong Kong represents the second-largest market for Israeli polished diamond exports, comprising 28% of the total. Hong Kong’s role as a major global trading hub and gateway to the broader Asian market has made it a critical destination for Israeli diamonds. The city’s sophisticated jewelry industry and its position as a financial center facilitate the distribution of polished diamonds throughout Asia, including China, Japan, and Southeast Asia. The substantial share of exports to Hong Kong highlights the strategic importance of Asian markets to Israel’s diamond trade and the growing demand for luxury goods in the region. Belgium ranks third among Israel’s polished diamond export markets, holding an 8% share. Belgium, particularly the city of Antwerp, has long been a global center for diamond trading and cutting, and it maintains close commercial links with Israel’s diamond industry. The trade relationship between Israel and Belgium is characterized by the exchange of polished diamonds and expertise, with Antwerp serving as a key distribution and trading point for diamonds sourced from Israel. Although Belgium’s share is smaller compared to the United States and Hong Kong, it remains a vital partner in the global diamond supply chain and contributes to the diversification of Israel’s export markets. By 2016, cut diamonds had become Israel’s largest export product, accounting for 23.2% of all exports. This significant proportion underscores the central role that the diamond industry plays in the Israeli economy. The prominence of cut diamonds in the export portfolio reflects the country’s specialization in high-value manufacturing and its ability to add substantial value through the cutting and polishing processes. The diamond sector’s contribution to exports also highlights its importance as a source of foreign exchange and employment, supporting a wide range of ancillary industries such as trading, finance, and logistics. The continued dominance of cut diamonds in Israel’s export economy illustrates the enduring strength and global competitiveness of its diamond industry despite periodic challenges.

Israel has established itself as one of the world’s foremost exporters of military equipment, accounting for a significant share of the global arms market. In 2007, Israeli defense exports represented approximately 10% of the worldwide total, underscoring the country’s prominent role in supplying advanced military technology internationally. This substantial market share reflects decades of focused development in defense manufacturing, supported by Israel’s strategic imperatives and its emphasis on technological innovation. The country’s defense industry has evolved into a critical component of its economy, leveraging cutting-edge research and development to produce a diverse array of military hardware that meets the demands of various international clients. By 2010, the stature of Israel’s defense sector was further cemented when three major Israeli companies—Elbit Systems, Israel Aerospace Industries (IAI), and RAFAEL Advanced Defense Systems—were listed on the Stockholm International Peace Research Institute (SIPRI) index of the world’s top 100 arms-producing and military service companies. This recognition highlighted the global competitiveness of Israel’s defense firms, which have consistently demonstrated expertise in areas such as aerospace, missile defense, electronic warfare, and unmanned systems. Elbit Systems, known for its advanced electronics and surveillance technologies, IAI, with its broad portfolio of aerospace and defense products, and RAFAEL, specializing in missile and defense systems, collectively represent the backbone of Israel’s arms manufacturing capabilities. Their inclusion in the SIPRI list not only signified their economic scale but also their technological sophistication and strategic importance on the global stage. The defense industry in Israel holds a strategically vital position within the national economy, functioning as a major employer and a key driver of technological innovation. It provides thousands of jobs across a range of disciplines, from engineering and manufacturing to research and development, thereby contributing significantly to Israel’s economic stability and growth. Beyond its domestic impact, the defense sector plays a pivotal role in the global arms market, supplying a wide spectrum of military equipment to allied and partner nations. This dual function—as both an economic engine and a strategic asset—reflects Israel’s broader security doctrine, which emphasizes self-reliance, technological superiority, and international cooperation through defense exports. By 2012, Israel had ascended to become the 11th largest arms exporter in the world, a ranking that attests to the country’s expanding influence in the international defense trade. This position was achieved through sustained growth in arms sales and the diversification of export markets. Between 2004 and 2011, total arms transfer agreements involving Israeli companies exceeded US$12.9 billion, illustrating the scale and financial magnitude of Israel’s defense export activities. These agreements encompassed a variety of contracts for the sale of military hardware, technology transfers, and collaborative development projects, reflecting Israel’s ability to meet complex and evolving defense requirements worldwide. In 2012 alone, Israeli defense equipment exports reached an estimated value of US$7 billion, marking a 20% increase compared to the previous year’s defense-related exports. This surge was driven by heightened demand for Israel’s advanced military technologies, including unmanned aerial vehicles, missile defense systems, and electronic warfare equipment. The growth in export revenues also mirrored Israel’s success in penetrating new markets and strengthening existing partnerships, enabling the country to enhance its share of the global arms trade despite increasing competition from other defense exporters. The majority of Israeli defense exports have traditionally been sold to the United States and European countries, which constitute the largest and most consistent markets for Israeli military technology. These regions value Israel’s innovative solutions and the operational experience garnered through the country’s unique security challenges. In addition to these primary markets, Israel has expanded its defense trade footprint to include Southeast Asia and Latin America, where emerging economies and regional security concerns have created demand for sophisticated military equipment. This geographic diversification has allowed Israeli defense firms to mitigate risks associated with dependence on a limited number of buyers and to capitalize on opportunities in fast-growing defense markets. Among Israel’s international clients, India stands out as the largest arms market, making it a major recipient of Israeli defense exports. The defense relationship between Israel and India has grown substantially over recent decades, driven by shared strategic interests and complementary technological capabilities. India’s acquisition of Israeli military equipment spans a wide range of categories, including unmanned aerial vehicles, missile systems, electronic warfare technologies, and advanced surveillance platforms. This robust partnership has not only facilitated significant arms sales but has also fostered joint research and development initiatives, technology transfers, and defense cooperation agreements, further deepening the bilateral defense ties between the two nations. Israel is widely regarded as the leading global exporter of unmanned aerial vehicles (UAVs), a sector in which it has maintained technological leadership and market dominance. Israeli companies pioneered many of the innovations that have shaped modern UAV design and application, enabling the country to capture a substantial share of the international drone market. According to SIPRI data, Israeli defense companies were responsible for approximately 41% of all drones exported worldwide during the period from 2001 to 2011. This dominant position reflects Israel’s early investment in UAV technology, its operational experience in deploying drones for intelligence, surveillance, and reconnaissance missions, and its ability to tailor UAV solutions to the specific needs of diverse customers. The prominence of Israeli UAV exports has been a key factor in the overall growth of the country’s defense industry, as drones have become increasingly central to modern military operations globally. Israeli UAVs are known for their reliability, advanced sensor suites, and versatility, making them attractive to a wide range of armed forces. The success in this niche market has also spurred further innovation within Israel’s defense sector, leading to the development of more sophisticated unmanned systems, including armed drones and autonomous platforms, which continue to enhance Israel’s competitive edge. In 2021, Israel’s defense exports reached a record high of US$11.2 billion in sales, reflecting sustained growth and resilience in the face of global economic and geopolitical challenges. This milestone underscored the continued demand for Israeli military technology and the effectiveness of the country’s defense export strategies. The increase in export revenues was driven by strong performance across multiple product categories, including UAVs, missile defense systems, electronic warfare equipment, and cybersecurity solutions. This expansion also demonstrated Israel’s ability to adapt to shifting market dynamics and to leverage its technological strengths to meet the evolving security needs of its international partners. Notably, exports to Arab countries that joined the Abraham Accords accounted for approximately 7% of all Israeli defense exports, marking a significant development in the regional defense trade landscape. The normalization agreements signed between Israel and several Arab states opened new avenues for defense cooperation and arms sales, previously constrained by longstanding political barriers. This emerging market segment reflects a broader trend of increasing security collaboration in the Middle East, driven by shared concerns over regional threats and the desire to enhance military capabilities through access to advanced Israeli technologies. The inclusion of these countries as defense customers represents both a strategic opportunity and a shift in Israel’s export patterns, highlighting the evolving nature of its defense industry in a changing geopolitical environment.

Israel has long been recognized as a major tourist destination, attracting visitors from around the world, with a particularly strong appeal to individuals of Jewish ancestry. This connection is deeply rooted in the country’s historical, religious, and cultural significance, as Israel is home to numerous sites of profound importance to Judaism, Christianity, and Islam. Pilgrimages to the Western Wall in Jerusalem, the ancient city of Safed, and other sacred locations have drawn countless Jewish visitors seeking to connect with their heritage. Beyond religious tourism, Israel’s diverse landscapes, vibrant cities, and archaeological treasures contribute to its broad appeal, making it a multifaceted destination for travelers with varied interests. In 2019, Israel welcomed approximately 4.55 million foreign tourists, marking a significant milestone in the country’s tourism sector. This influx of visitors represented a notable increase compared to previous years and underscored the growing global interest in exploring Israel’s unique offerings. To put this figure into perspective, the number of tourists in 2019 was roughly equivalent to one foreign visitor for every two Israeli residents, highlighting the substantial role that tourism plays in the country’s demographic and economic landscape. This ratio also illustrates the intensity of international engagement with Israel, reflecting both the country’s accessibility and its appeal as a travel destination. The growth in tourist arrivals between 2016 and 2019 was particularly striking, with a 25% increase recorded over this three-year period. This surge can be attributed to several factors, including enhanced international flight connectivity, targeted marketing campaigns by Israel’s Ministry of Tourism, and the expansion of tourism infrastructure such as hotels, transportation networks, and visitor services. Additionally, geopolitical developments and improvements in regional stability during this time contributed to a more favorable environment for tourism. The rise in visitor numbers also mirrored broader global trends in travel, with more people seeking cultural and historical experiences in destinations like Israel. Economically, tourism proved to be a vital sector for Israel in 2019, contributing approximately ₪20 billion (New Israeli Shekels) to the national economy. This figure represented an all-time record at that point, underscoring the increasing economic importance of the tourism industry. The revenue generated from tourism supported a wide range of economic activities, including hospitality, retail, transportation, and cultural services, thereby creating employment opportunities and stimulating local economies across the country. The government’s investment in promoting tourism and improving infrastructure was instrumental in achieving this record level of economic contribution, reflecting a strategic focus on tourism as a key driver of economic growth. Among the numerous attractions that draw tourists to Israel, Masada stands out as the most popular paid visited site. This ancient fortress, perched atop a plateau overlooking the Dead Sea, holds immense historical and symbolic significance. Masada is renowned for its dramatic story of Jewish resistance against Roman forces during the First Jewish–Roman War, culminating in a mass suicide by the defenders to avoid capture. The site features well-preserved archaeological remains, including palaces, fortifications, and water cisterns, which provide visitors with a vivid glimpse into ancient life. The popularity of Masada as a tourist destination reflects its powerful narrative and its status as a symbol of Jewish resilience and heritage, attracting hundreds of thousands of visitors annually who seek to experience its historical and cultural legacy firsthand.

In 2016, Israel’s international trade in goods reflected a total export value of approximately US$55.8 billion, while imports amounted to US$61.9 billion, resulting in a trade deficit in goods. This deficit was largely attributable to the country’s reliance on imports of raw materials, crude oil, production inputs, and finished consumer goods necessary for domestic consumption and industrial production. Despite this imbalance in goods trade, Israel’s overall external trade position improved in subsequent years. By 2017, the total value of Israel’s exports, encompassing both goods and services, reached US$102.3 billion, surpassing imports which stood at US$96.7 billion. This shift led to a trade surplus when services were included, underscoring the growing significance of Israel’s service sector in its external trade balance. The persistent trade deficit in goods is characteristic of Israel’s economic structure, which depends heavily on importing raw materials and energy resources that are not abundantly available domestically. These imports are essential for the country’s robust manufacturing and high-technology industries. Conversely, Israel’s exports are predominantly composed of high-value-added products, reflecting the advanced technological capabilities of its economy. Key export categories include electronic components, high-technology equipment, precision tools, machinery, cut diamonds, refined petrochemicals, and pharmaceuticals. These sectors benefit from Israel’s emphasis on innovation, research and development, and its highly skilled workforce, which collectively contribute to the country’s competitive advantage in global markets. In addition to goods, Israel typically generates a substantial trade surplus in services. This surplus is driven by several dynamic sectors such as tourism, which attracts millions of visitors annually, and knowledge-intensive industries including software development, engineering services, biomedical research, and scientific research and development. These service industries leverage Israel’s strong educational institutions and innovative ecosystem, further enhancing the country’s export profile. The positive balance in services trade helps offset the goods deficit and contributes to a favorable overall external trade position. Consequently, Israel’s current account registered a significant surplus, amounting to 4.7% of gross domestic product (GDP) as of 2017, highlighting the net inflow of foreign currency into the economy. The United States stands as Israel’s largest trading partner, reflecting the deep economic and strategic ties between the two countries. Israel ranks as the 26th-largest trading partner of the United States, underscoring the importance of bilateral trade relations. Two-way trade between Israel and the U.S. expanded substantially over the years, reaching approximately US$24.5 billion in 2010, nearly doubling from US$12.7 billion in 1997. This growth reflects increasing commercial exchanges and investment flows in both directions. U.S. exports to Israel encompass a diverse range of products, including computers, integrated circuits, aircraft parts, defense equipment, wheat, and automobiles. These exports support Israel’s technological infrastructure, defense capabilities, and domestic consumption needs. Conversely, Israel’s main exports to the United States include cut diamonds, jewelry, integrated circuits, printing machinery, and telecommunications equipment. The prominence of cut diamonds and high-technology products in Israel’s export basket to the U.S. illustrates the country’s specialization in precision manufacturing and advanced technology sectors. The telecommunications and printing machinery exports further demonstrate Israel’s industrial diversity and capacity for producing sophisticated equipment. The bilateral trade relationship has been facilitated by formal agreements, notably the free trade agreement (FTA) signed between Israel and the United States in 1985. This agreement gradually eliminated tariffs on most traded goods over a ten-year period, significantly reducing trade barriers and promoting increased commercial exchange. In addition to the FTA, an agricultural trade accord was signed in November 1996 to address remaining trade barriers not covered by the original agreement. This accord aimed to enhance agricultural trade by reducing tariffs and facilitating the exchange of agricultural products, thereby complementing the broader trade liberalization framework established by the FTA. Despite these agreements, some non-tariff barriers and tariffs on certain goods persist between Israel and the United States, reflecting ongoing challenges in achieving fully liberalized trade. These barriers include regulatory measures, standards, and occasional tariffs that affect specific sectors, underscoring the complexity of international trade negotiations and the need for continued dialogue to resolve outstanding issues. Beyond the United States, Israel has pursued trade and cooperation agreements with other major economic partners. The country maintains agreements with the European Union and Canada, which facilitate trade flows and economic cooperation. Israel has also actively sought to establish similar agreements with regional neighbors such as Turkey and Jordan, as well as with several Eastern European countries. These efforts reflect Israel’s strategic interest in diversifying its trade relationships and integrating more deeply into global and regional markets. The European Union, in particular, represents Israel’s top destination for exports. Between October 2011 and January 2012, Israel exported goods worth approximately US$5 billion to the EU, accounting for 35% of the country’s total exports during that period. This significant share highlights the importance of the EU as a trading partner and the depth of economic ties between Israel and European countries. During the same timeframe, Israel’s exports to East Asia and the Far East totaled approximately US$3.1 billion, indicating growing commercial engagement with these dynamic and rapidly expanding markets. The increasing trade flows to East Asia reflect Israel’s efforts to capitalize on opportunities in emerging economies and to diversify its export destinations beyond traditional Western markets. The expansion of trade with East Asian countries is also consistent with global trends of increasing economic interdependence and the rising importance of Asia in international trade. Historically, Israel’s trade relations with the Arab world were minimal until the mid-1990s, largely due to the Arab League boycott initiated in 1945. This boycott comprised primary, secondary, and tertiary measures aimed at companies operating in or with Israel, effectively restricting commercial interactions between Israel and Arab states. The boycott significantly limited Israel’s access to regional markets and constrained economic integration with neighboring countries. However, the political landscape began to shift in the 1990s, leading to gradual improvements in trade relations. By 2013, commercial trade between Israel and the Palestinian territories had grown substantially, reaching an estimated annual value of approximately US$20 billion. This trade volume reflects increasing economic interdependence and cooperation despite ongoing political complexities. In terms of export concentration, the Israeli economy has exhibited a notable dependence on a relatively small number of large exporters. In 2012, ten companies accounted for 47.7% of Israel’s total exports, underscoring the significant role played by major industrial and technological firms. These leading exporters included Intel Israel, a key player in semiconductor manufacturing; Elbit Systems, specializing in defense electronics; Oil Refineries Ltd, involved in energy and petrochemicals; and Teva Pharmaceuticals, a global leader in generic medicines. Other prominent companies contributing to export volumes were Iscar, a producer of precision cutting tools; Israel Chemicals, operating in the chemical and fertilizer sectors; Makhteshim Agan, an agrochemical company; Paz Oil Company, involved in fuel distribution; Israel Aerospace Industries, a major defense and aerospace manufacturer; and Hewlett-Packard’s Indigo division, known for digital printing technologies. The concentration of exports among a limited number of companies has raised concerns among economic policymakers and institutions. Both the Bank of Israel and Israel’s Export Institute have issued warnings about the potential risks associated with overreliance on a small group of exporters. Such dependence can expose the economy to vulnerabilities stemming from fluctuations in global demand, technological disruptions, or company-specific challenges. Diversification of the export base is therefore considered critical to enhancing economic resilience and sustaining long-term growth. These institutions advocate for policies that encourage the development of new exporters and sectors to mitigate risks and ensure a more balanced and robust external trade profile for Israel.

In 2016, Israel’s export landscape was characterized by a concentration of trade with a select group of countries that together accounted for a substantial portion of its total export volume. The United States emerged as the dominant export destination, receiving approximately 32% of Israel’s exports, which translated to a value of around 17.6 billion US dollars. This significant trade volume was largely driven by the export of cut diamonds and medicaments, reflecting Israel’s strong position in the global diamond trade as well as its advanced pharmaceutical industry. Following the United States, Hong Kong was the second-largest export destination, accounting for 8% of Israeli exports, with shipments valued at about 4.44 billion US dollars. The primary commodity exported to Hong Kong was cut diamonds, underscoring the critical role that the diamond industry played in Israel’s export economy. The United Kingdom ranked third among Israel’s export destinations in 2016, absorbing 7% of the total exports, amounting to roughly 3.91 billion US dollars. Medicaments were the main exports to the UK, highlighting the importance of Israel’s pharmaceutical sector in its trade relations with European markets. China occupied the fourth position, with 6% of Israel’s exports, valued at approximately 3.33 billion US dollars. The exports to China were predominantly electrical equipment and integrated circuits, indicating Israel’s engagement in high-technology and electronics manufacturing sectors. Belgium and Luxembourg, considered together, accounted for 4.5% of Israeli exports, exporting goods worth about 2.51 billion US dollars as of 2015 data. The main export product to this region was cut diamonds, further emphasizing the prominence of the diamond trade in Israel’s export portfolio. India was the sixth-largest export destination for Israel in 2016, receiving 4.3% of total exports, which equated to around 2.4 billion US dollars. Similar to other key markets, cut diamonds constituted the bulk of exports to India, reflecting the interconnected nature of the global diamond industry. The Netherlands followed with 3.8% of Israel’s exports, amounting to approximately 2.14 billion US dollars. The primary exports to the Netherlands included medicaments and computer equipment, illustrating the diversity of Israel’s high-tech and pharmaceutical exports. Germany, accounting for 2.7% of exports valued at about 1.52 billion US dollars, was a market for a varied range of products, indicating a broad-based trade relationship. Switzerland, with 2.6% of exports totaling approximately 1.47 billion US dollars, primarily imported cut diamonds from Israel, reinforcing Switzerland’s role as a major diamond trading hub. France, also accounting for 2.6% of exports at around 1.45 billion US dollars, imported a varied range of products from Israel, reflecting a multifaceted trading relationship. On the import side, Israel’s top ten origins of imports in 2016 represented a diverse group of countries, each contributing significantly to the nation’s supply chain. The United States led as the largest source of imports, accounting for 13% of total imports, which translated to about 8.1 billion US dollars. The imports from the US were mainly diamonds and electronics, highlighting the ongoing importance of these sectors in bilateral trade. China, excluding Hong Kong, was the second-largest import origin, supplying Israel with goods valued at approximately 5.9 billion US dollars. The product mix from China was varied, encompassing a wide range of manufactured goods, reflecting China’s role as a global manufacturing powerhouse and Israel’s demand for diverse industrial and consumer products. Switzerland was the third-largest supplier to Israel in 2016, with imports amounting to around 4.29 billion US dollars. The primary imports from Switzerland included oil, chemicals, and diamonds, indicating a complex trade relationship involving energy products, chemical goods, and the diamond industry. Germany followed closely, with imports valued at approximately 4.07 billion US dollars, consisting of a varied range of products, which suggested a broad and diversified trade partnership. Belgium and Luxembourg, combined, supplied Israel with about 3.91 billion US dollars worth of goods as of 2015 data, mainly diamonds, underscoring their continued importance in the diamond supply chain. The United Kingdom was another key import origin, exporting roughly 3.67 billion US dollars worth of goods to Israel in 2016, with oil being the primary import. This highlights the UK’s role as a supplier of energy resources to Israel. The Netherlands contributed about 2.7 billion US dollars in exports to Israel, mainly consisting of computers and electronic equipment, which aligns with the Netherlands’ status as a major European technology hub. Italy’s exports to Israel in 2016 were valued at approximately 2.69 billion US dollars, encompassing a varied product range that reflects Italy’s diverse industrial base. Turkey supplied Israel with about 2.6 billion US dollars worth of goods, covering a broad spectrum of products, indicating a multifaceted trade relationship between the two neighboring countries. Japan was also a significant supplier to Israel, with exports totaling roughly 2.35 billion US dollars in 2016. The primary goods imported from Japan included cars and photo lab equipment, demonstrating Israel’s reliance on Japanese technology and automotive products. The data underlying these statistics were sourced from the Observatory of Economic Complexity and were archived on 11 May 2019 at the Wayback Machine, MIT, ensuring the reliability and accessibility of the trade figures presented. Collectively, these import and export patterns in 2016 illustrate Israel’s integration into the global economy through a network of specialized trade relationships, with particular emphasis on diamonds, pharmaceuticals, electronics, and energy products.

The Global Competitiveness Report for the years 2016 to 2017 positioned Israel as the world’s second most innovative economy, underscoring the nation’s robust capabilities in innovation and technological advancement. This ranking reflected Israel’s substantial investments in research and development, a dynamic startup ecosystem, and a highly skilled workforce that collectively fostered an environment conducive to pioneering new technologies and business models. The report highlighted Israel’s ability to transform scientific research into commercial applications, which has been a critical driver of its economic growth and global competitiveness. This recognition placed Israel just behind Switzerland, emphasizing its status as a global leader in innovation. Israel’s standing on the United Nations’ Human Development Index (HDI) further illustrated the country’s advanced socio-economic development. Ranked 19th out of 189 countries, Israel demonstrated a high level of human development, which encompasses factors such as life expectancy, education, and per capita income. This ranking reflected Israel’s comprehensive social infrastructure, including universal healthcare, a strong education system, and relatively high standards of living. The HDI ranking also indicated the country’s success in translating economic growth into tangible improvements in the quality of life for its citizens, positioning Israel among the most developed nations worldwide. By 2018, Israel was ranked 20th out of 133 countries on the Economic Complexity Index (ECI), a measure that assesses the diversity and sophistication of a country’s productive capabilities. This ranking indicated that Israel’s economy was not only diverse but also capable of producing complex products that require advanced knowledge and skills. The ECI ranking reflected Israel’s transition from a primarily agrarian and resource-based economy to one dominated by high-tech industries, pharmaceuticals, and advanced manufacturing. This complexity enabled Israel to maintain a competitive edge in global markets by exporting a wide range of sophisticated goods, thereby reducing its vulnerability to economic shocks. The IMD World Competitiveness Yearbook of 2016 placed Israel as the 21st most competitive economy globally among 61 surveyed economies. This ranking took into account various factors such as economic performance, government efficiency, business efficiency, and infrastructure. Israel’s position in this report highlighted its ability to foster a business environment that encourages entrepreneurship, innovation, and investment. The country’s competitive strengths included a highly educated workforce, strong technological capabilities, and a proactive government policy that supported economic growth and international trade. Despite challenges such as geopolitical risks and regional instability, Israel’s economy demonstrated resilience and adaptability. Israel’s economic resilience was further recognized through its ranking as the world’s most durable economy in the face of crises. This designation reflected the country’s ability to withstand global economic downturns and maintain steady growth despite external shocks. Factors contributing to this durability included prudent fiscal management, a diversified economy, and a flexible labor market. Israel’s capacity to absorb and adapt to economic disruptions was evident during the global financial crisis of 2008-2009 and subsequent economic challenges, where it managed to sustain growth and employment levels better than many other developed economies. Investment in research and development (R&D) has been a cornerstone of Israel’s economic strategy, and the country was ranked first globally in the rate of R&D center investments. This ranking emphasized Israel’s commitment to maintaining its technological edge through substantial investments in innovation infrastructure. Both multinational corporations and domestic firms have established R&D centers in Israel, attracted by its pool of skilled engineers and scientists, as well as its vibrant startup culture. The high level of R&D investment has translated into continuous technological breakthroughs, particularly in sectors such as cybersecurity, biotechnology, and information technology. The Bank of Israel, the country’s central bank, was recognized for its efficient functioning, achieving the top rank among central banks and improving significantly from 8th place in 2009. This improvement reflected the bank’s effective monetary policy, regulatory oversight, and crisis management capabilities. The Bank of Israel played a crucial role in maintaining financial stability, controlling inflation, and supporting economic growth through prudent interest rate policies and financial supervision. Its enhanced reputation contributed to increased investor confidence and the overall stability of Israel’s financial system. Israel’s supply of skilled manpower was ranked first globally, underscoring the country’s highly educated and capable workforce. This ranking was a testament to Israel’s emphasis on education, particularly in science, technology, engineering, and mathematics (STEM) fields, which have been critical in supporting its high-tech industries. The country’s education system, combined with mandatory military service that often provides technical training, has produced a labor force adept at innovation and problem-solving. This skilled manpower supply has been instrumental in attracting foreign investment and fostering the growth of knowledge-intensive sectors. Israeli companies, especially those operating in the high-tech sector, have achieved remarkable success in raising capital on Wall Street and international financial markets. As of 2010, Israel ranked second among foreign countries in the number of companies listed on U.S. stock exchanges, reflecting the global appeal and competitiveness of Israeli enterprises. This success was driven by the country’s strong innovation ecosystem, entrepreneurial culture, and the ability to develop cutting-edge technologies with global market potential. The access to international capital markets provided Israeli companies with the financial resources necessary to scale operations, invest in research, and expand their global reach. Since the mid-1980s and early 1990s, Israel underwent a significant economic transformation, moving away from a socialist economic model toward a free-market capitalist economy. This transition involved liberalizing trade, reducing government intervention, privatizing state-owned enterprises, and encouraging private sector growth. The economic reforms facilitated increased competition, innovation, and integration into the global economy, which helped spur rapid economic expansion and diversification. This shift also contributed to the development of a dynamic high-tech sector and improved the overall efficiency and productivity of the Israeli economy. As of 2020, Israel’s economic freedom score was 74.0, ranking it as the 26th freest economy according to the 2020 Index of Economic Freedom. This score reflected the country’s relatively open markets, sound regulatory framework, and protection of property rights. The ranking indicated a favorable environment for entrepreneurship and investment, supported by transparent legal institutions and a commitment to market-oriented policies. However, the score also reflected challenges such as relatively high tax rates and regulatory complexities that could constrain certain aspects of economic freedom. Israel was ranked 35th on the World Bank’s Ease of Doing Business Index, signaling a relatively favorable business environment. This ranking took into account factors such as the ease of starting a business, obtaining construction permits, registering property, and enforcing contracts. Israel’s position demonstrated the country’s efforts to streamline bureaucratic procedures, improve regulatory efficiency, and foster a supportive environment for business operations. The ranking also highlighted ongoing challenges, including regulatory hurdles and infrastructure constraints that could impact business activities. The country’s economic competitiveness was underpinned by strong protection of property rights, relatively low levels of corruption, and high openness to global trade and investment. Israel’s legal framework ensured that intellectual property and physical assets were well protected, which encouraged innovation and investment. The government’s commitment to transparency and anti-corruption measures contributed to a business climate that was generally perceived as fair and predictable. Additionally, Israel’s active participation in international trade agreements and openness to foreign direct investment facilitated integration into global value chains and access to international markets. Despite these strengths, income and corporate tax rates in Israel remained relatively high compared to other nations. These tax rates reflected the government’s efforts to finance social services and public infrastructure but also posed challenges for businesses and individuals by potentially reducing disposable income and investment incentives. The tax burden was a subject of ongoing policy debate, balancing the need for fiscal sustainability with the goal of maintaining economic competitiveness. In 2020, Israel was ranked 35th out of 179 countries on Transparency International’s Corruption Perceptions Index, indicating moderate perceptions of corruption. This ranking suggested that while Israel maintained a generally transparent and accountable public sector, concerns about corruption persisted in certain areas. The government had implemented various measures to combat corruption, including legal reforms and enforcement actions, to improve public trust and institutional integrity. Bribery and other forms of corruption were illegal in Israel, which had been a signatory to the OECD Bribery Convention since 2008. This international commitment reflected Israel’s dedication to combating corruption in both the public and private sectors, particularly in relation to international business transactions. The country’s adherence to the convention involved implementing stringent anti-bribery laws, promoting corporate compliance programs, and cooperating with international efforts to prevent corrupt practices. In April 2024, Fitch Ratings, one of the three leading U.S. credit rating agencies, issued a warning that the ongoing Gaza war could cause a significant decline in Israel’s credit metrics. This warning highlighted concerns about the potential economic impact of prolonged conflict, including increased government spending on defense, disruptions to economic activity, and investor uncertainty. Fitch’s assessment underscored the risks that geopolitical instability posed to Israel’s fiscal position and creditworthiness. Subsequently, in August 2024, Fitch downgraded Israel’s credit rating due to escalating geopolitical tensions. The downgrade reflected the agency’s reassessment of the country’s economic outlook in light of the heightened security risks and potential fiscal pressures. This action signaled increased borrowing costs for Israel and raised concerns among investors regarding the country’s ability to maintain fiscal discipline amid ongoing regional instability. The credit rating of Israel was further downgraded to Baa1 by Moody’s in September 2024, marking a continuation of the negative outlook on the country’s credit profile. Moody’s downgrade was influenced by similar factors, including geopolitical risks, potential disruptions to economic growth, and increased fiscal vulnerabilities. The lowered rating indicated a more cautious stance by investors and credit agencies toward Israel’s medium-term economic prospects. In October 2024, Standard & Poor’s (S&P) also downgraded Israel’s credit rating, reflecting persistent concerns over regional instability and the broader economic outlook. This downgrade completed a series of credit rating reductions by the major agencies within a six-month period, emphasizing the significant challenges that geopolitical tensions posed to Israel’s economic stability. The collective actions of Fitch, Moody’s, and S&P underscored the importance of resolving regional conflicts and restoring investor confidence to support Israel’s economic resilience going forward.