Traditionally Israel spends a significant amount of funds on defence. According to the Stockholm International Peace Research Institute (SIPRI), Israel spends almost on average 6.3% of its Gross Domestic Product (GDP) on defence for the period 2006-2015. This trend was reaffirmed as the revised defence budget for 2016 reached 76.31 billion Israeli Shekel –ILS- (approximately 16.6 billion US dollars). This actually highlights the determination of the Israeli government to support a defence budget which will ensure that the armed forces will be able to deliver their core capabilities.

Between 2005 and 2008, Israel experienced a period of strong growth, exceeding the average growth rate of advanced economies. In 2009, while most countries recorded a decline in Gross Domestic Product (GDP), Israel maintained a positive 1.3% growth rate. The reason was that the country entered the crisis with solid foundations, following years of prudent fiscal policy and a resilient banking sector. In the period 2010-2014, Israel experienced an average economic growth of 4.1%. After a moderate rate in 2015, economic growth was projected to stabilise around the 3.3% recorded in 2016, for at least 2017 and 2018, according to the Organisation for Economic Co-operation and Development (OECD). Budgetary easing and low interest rates will be among the factors that will stimulate domestic demand and employment and thus contribute to the solid performance of the economy.

The limited size of the domestic market has always pushed Israeli entrepreneurs to seek customers abroad. As a result, the economy of the country is highly export-oriented. The main export products of the country are cut diamonds, high-technology equipment, and pharmaceuticals products. In 2015, Israel’s total exports were reduced by about 5 billion USD, reaching 64.1 billion US dollars. However, the parallel high decrease of imports to 62.1 billion USD, lead to a trade balance surplus of 1.99 billion US dollars (compared to the deficit of 3.37 Billion USD in 2014).

In more detail, goods exported by the country in 2015, were mostly directed to the EU (29%), the US (24%) and Asia (24%).

Israel, as a technologically advanced market economy, with a well-established rule of law, is an attractive destination for international investments. The country’s inward Foreign Direct Investment (FDI) flow reached 11.6 billion US dollars in 2015, an almost two-fold increase from 6.7 billion in 2014. However, it must be stressed that FDI inflows vary significantly, since the respective inflows for 2013 were some 12.5 billion US dollars.

In 2013, the bulk amount of associated investments (almost 58%) were concentrated in four main industries: manufacturing (32.8%), telecommunications and ICT services (13.7%), R&D (7.3%) and financial services (except insurance and pension funds) (3.8%). Regarding the geographical origin of the FDI inflows, 32.4% of all investments came from the US, 8.1% from the Cayman Islands (it should be mentioned that these investments came almost exclusively from offshore financial entities), 8% from the Netherlands, 3.1% from Hong Kong and 2.1% each, from Switzerland and the UK.

FDI Inflows By Countries and Industry in 2013

Main Investing Countries in (%)

Main Invested Sectors in (%)





Cayman Islands


Telecom., computer programming & information services


The Netherlands




Hong Kong


Financial services (except insurance and pension funds)







Finally, it is worth mentioning that Israel’s workforce is particularly competitive because of the ‘informal’ but effective get-down-to-business culture, its exceptional ingenuity and entrepreneurial spirit. The combination of culture, skill and initiative creates a flexible, working system that allows for great adaptability. Typically, employees are quickly retrained so if ever unemployed, this would be for the shortest possible time. This enables the Israeli companies to be amongst the most competitive in a variety of industries. Furthermore, employees in the country enjoy good wages and social benefits.

Additionally, the state invests heavily in training, ensuring that skills and productivity are continuously improved and adapted to the needs of companies. Therefore employees have increased opportunities to find a job. Such training/retraining opportunities also mean that industries which are lacking in terms of labour force, or even emerging industries, do not have to wait as long so as to find the appropriately equipped workers, while on the other hand the unemployment rate may thus be kept low. It is indicative that in 2016, the unemployment rate of persons aged 15 and over was 4.8%, a sizable improvement when compared to the previous year (5.3%) and the 4th year in a row where a decrease in unemployment rate has been achieved.