The Israeli Economy: Current Trends, Strength and Challenges

Transcription

1 The Israeli Economy: Current Trends, Strength and Challenges Dr. Karnit Flug Governor of the Bank of Israel

2 GDP per capita Growth Rates 8 GDP per capita annual % change ( F) Developing Economies Spain Israel Advanced Economies *Simple average for 21 rich OECD countries and emerging markets according to IMF deoinition 2 Source : IMF

3 GDP per Capita, International Comparison $ GDP per Capita (Current US $,PPP adjusted) selected OECD countries, 2015 $ $ $ $ $ $34,054 $ $ $ $ $- 3 Source : IMF

4 Israel s Goods and Services Exports and World Trade, F Index 2008= Israeli Exports Forecast *Excl. diamonds and start-ups 4 Source : Bol and IMF

5 Structural Change in the Composition of Growth Private Consumption is Leading While Exports have a modest contribution % The increase in uses: The total increase and the contribution of uses Public consumption Private consumption Exports (excl. diamonds ) Investment Total increase in uses

6 Labor Market Quarterly, , % % 12, ,5 Participation Rate 10, ,5 Employment rate 8,5 7,5 Unemployment rate 6,5 5, ,5 3, *The data for 2016-Q4 is calculated by the average of October and November 6 Source : Central Bureau of Statistics Labor Force Survey

7 Unemployment rate, 25-64, 2016 % , ,8 0 Iceland Japan Switzerland Korea Czech Republic Germany Mexico Norway Israel United States Hungary United Kingdom New Zealand Australia Netherlands Austria Poland Denmark Luxembourg Chile Estonia Sweden Canada OECD Slovenia Ireland Belgium Finland Latvia Slovak Republic Latvia France Turkey Portugal Spain Greece 7 Source: OECD and BoI

8 Real Wage per Employee Post* NIS Last 12-month percent change 3.3% Business Sector 2.7% Total 2.0%Public Sector *Seasonally adjusted, 12 months moving average, 2015 prices 8 Source : Central Bureau of Statistics Data

9 Housing Prices since the GFC Real Housing Prices Index Q1-2007= Israel Canada Australia Germany United Kingdom Japan France United States Ireland Spain 50 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q SOURCE: OECD

10 Housing Prices the Long Run index, 2000= Source: BoI & CBS

11 Bank of Israel Policy

12 Actual InOlation and InOlation Expectations % Expectations Forward* InXlation 12 month -4 * Forward inolation expectations 3-5 years 12 Source: Bol

13 Exchange Rates NIS 5,2 5,0 4,8 4,6 4,4 4,2 / Left axis Index ,0 3,8 3,6 3,4 Nominal Effective /$ Left axis ,2 01/12 03/12 05/12 07/12 09/12 11/12 01/13 03/13 05/13 07/13 09/13 11/13 01/14 03/14 05/14 07/14 09/14 11/14 01/15 03/15 05/15 07/15 09/15 11/15 01/16 03/16 05/16 07/16 09/16 11/16 01/17 03/17 05/ Source : BoI

14 Bank of Israel Policy Tools Interest Rate (%) /07 06/07 11/07 04/08 09/08 02/09 07/09 Bond Purchases 18 Billion NIS 12/09 05/10 10/10 03/11 08/11 01/12 06/12 11/12 04/13 09/13 02/14 07/14 The Monetary Committee assesses that monetary policy will remain accommodative as long as needed for the inxlation return to it s target 12/14 05/15 10/15 03/16 08/16 0,1 01/17 06/17 FX Intervention (US$) Building reserves Intervention Natural Gas Purchase program + Intervention 01/17 08/16 03/16 10/15 05/15 12/14 07/14 02/14 09/13 04/13 11/12 06/12 01/12 08/11 03/11 10/10 05/10 12/09 07/09 02/09 09/08 04/08 11/07 06/07 01/07 Macroprudentia l Measures 11/36 07/09 02/82 10/54 05/27 01/00 Additional provision for high LTV loans Higher capital requirem ents for high LTV Variable Interest Rate limit LTV limit Higher capital requirements for high LTV PTI limit and capital require ment Higher capital requirements 03/16 10/15 05/15 12/14 07/14 02/14 09/13 04/13 11/12 06/12 01/12 08/11 03/11 10/10 05/10 12/09 07/09 02/09 09/08 04/08 11/07 06/07 01/07 14 Source : Bol

15 The Strengths Behind Israel s High Tech Sector

16 Israel is Leading in International Innovation Rankings Index Ranking 10 2 Factors in Israel that encourage innovation ü Quality universities that provide the economy with human capital, scientioic aptitude, and technological abilities ü Collaboration between the universities and industry ü Government support for commercial R&D ü Developed venture capital industry 16 Source: World Economic Forum & Bloomberg Innovation Report 2017

17 Venture Capital Investment as % of GDP, % 40% 35% 30% 25% 20% 15% 10% 5% 17 0% Israel United States Canada South Africa Korea Finland Switzerland Sweden Ireland United Kingdom Austria Portugal France Denmark Germany New Zealand Japan Netherlands Australia Hungary Estonia Norway Belgium Spain Slovak Republic Luxembourg Poland Seed/start-up/early stage Later stage venture Source : OECD Russian Federaaon Slovenia Italy

18 Share of the Population Aged with Tertiary-Level Education, 2015 % Source : OECD Education at a Glance 2015

19 Israel s Innovation Map 413 Fintech & ecommerce 255 Agro & Food Tech 177 Pharmaceuticals 144 אלקטרוניק ה 4,983 Start-Ups 300 Mobile & Telecom Tech 430 Software Applications 433 Security & Safety Tech 279 Cleantech 746 Digital Health & Medical Technologies 19 Source: Startup Nation Central

20 Employees In High-Tech, International Comparison % 9 Employees aged +15 in the high-tech field, Percentage of total, Source: CBS and EuroStat

21 Yet, There are Challenges Ahead

22 Output Per Hour Worked ,$ PPP, 2015 Constant Prices $ 70,00 65,00 60,00 55,00 USA 21 Rich Countries 50,00 45,00 40,00 35,00 Israel 30,00 25,00 20,00 22 Source : The Conference Board Total Economy Database 2016

23 The Productivity Gap Occurs due to Several Reasons 92 Total score (0-100) in 2017 Doing Business index Israel s score $ Capital per worker in the business sector 2014, in 2011 prices, $PPP Mexico Poland Chile Turkey New Zealand Israel Slovakia Estonia Hungary Japan Canada Iceland Australia Czech Republic OECD Slovenia United States Germany Sweden Switzerland United Kingdom Latvia Denmark Finland Netherlands Austria Luxembourg France Portugal Belgium Norway Spain Greece Ireland Italy New Zealand Denmark Korea Norway United Kingdom United States Sweden Estonia Finland Latvia Australia Germany Ireland Austria Iceland Canada Poland Portugal Czech Republic Netherlands France Slovenia Switzerland Spain Slovak Republic Japan Hungary Belgium Mexico Italy Israel Chile Luxembourg Greece Turkey Problems-solving in digital environment skills according to PIAAC survey Aged 15+, Source: BoI, RAMA, Doing Business

24 Indicators for Quality and Gaps in Human Capital 60% 40% 20% 0% The likelihood of students in the bottom quarter of socio-economic distribution scoring in the top quarter of the science performance distribution, % 16% Finland Korea Spain Canada Portugal United Kingdom Latvia Slovenia Poland Germany Australia United Stats Netherlands New-Zealand Ireland OECD Switzerland Denmark Belgium France Italy Norway Austria Russia Cezch Republic Swden Lituania Turkey Luxemburg Hungary Greece Slovak Republic Iceland Israel Chile Mexico Israel s students performance in reading, mathematics & science, PISA Mathematics Reading 39 Science OECD Score among 70 countries Performance differences between Hebrew & Arabic students in PISA- mathematics, 2015 Mathematics Reading Science Hebrew דוברי דוברי Arabic Speaking ערביתעברית Speaking Hebrew דוברי Arabicדוברי Hebrewדוברי Speaking Speaking Speaking ערביתעברית ערביתעברית Arabic Speaking Performance differences between students in PISA- mathematics, 2015 Israel Korea Belgium Slovak Republic Switzerland Portugal Ausria France Hungary Australia Italy Iceland Luxemburg New Zealand United Cezch Republic Netherlands Sweden OECD Germany Greece Japan United States Canada Slovenia Poland Lituania Spain Chile Norway Finland Turkey Estonia Denmark Ireland Latvia Mexico 24 Source: OECD, RAMA

25 Economic Income Inequality is high 0,6 Gini Index, 2014, at disposable income, post taxes and transfers Israel ,5 0,4 0,3 0,2 0,1 0 Iceland Norway Denmark Slovenia Finland Cezch Republic Belgium Slovak Republic Austria Luxemburg Sweden Nethelands Hungary Germany France Switzerland Poland Korea Ireland OECD Canada Italy Japan New Zealand Australia Portugal Greece Spain Latvia Unitred Kingdom Estonia Israel Turkey United States Mexico Chile *Israel data for Source : Based on Central Bureau of Statistics Data and OECD

26 Israel & Spain

27 Trade Relations Israel & Spain Exports & Imports of goods, 2016 Imports from Spain $1,577.3 Million Exports to Spain $896.1 Million 25% Motor Vehicles and Transport Equipment 16% Texales and Texale Aracles 10% Chemicals 7% Base Metals 15% Electrical Equipment and Machinery 33% Chemicals 31% Electrical Equipment and Machinery 4% Medical Instruments 6% Vegetable Products 5% Plastic Products 6% Articles of Stones 16% Others 9% Plastic Products 17% Others 27 Source: CBS

28 Trade Relations Israel & Spain Exports & Imports of Business Services, 2015 Imports from Spain $53 Million Exports to Spain $42 Million 32% 5% Research & R&D Development 31% Charges for the use of intellectual property 37% Advertising, Market Research, and Public Opinion Polling 5% Telecommunications 3%,Computer services 6% Accounting 6% 8% 8% Others Adverasing Food 5% Computer services 18% Services between Related Enterprises 50% Others 28 Source: CBS

29 To Sum Up The Israeli Economy has a great potential, but while part of the economy utilizes its strengths and resources, inclusive growth of the economy as a whole requires a comprehensive and persistent policy. The main pillars of such policy should address economic inequality, inefoicient regulation and the need to increase both investment and human capital. 29

30 Gracias!