Israel Economy Growing Faster Than Rest of Developed World

Never mind the collapse in confidence in Europe, the Palestinian proposal for UN recognition and heightened tensions with neighbouring Egypt and long-time ally Turkey. The Israeli economy just keeps growing faster than the rest of the developed world.

The International Monetary Fund (IMF) last week raised its forecast for the country and cut its estimate for the global economy on the impact of the European debt crisis. Israel’s gross domestic product (GDP) will expand 4.8 percent this year, according to the lender. That’s up from an April forecast of 3.8 percent and triple the pace for the average of the 34 advanced economies.

Citigroup said on September 18 it would establish a new Israeli research centre and Standard & Poor’s a week earlier raised the country’s credit rating. It cited the discovery of two gas fields off the coast of Israel. Mellanox Technologies, the Israeli adaptor maker part-owned by Oracle, said sales would grow 80 percent in the third quarter.

“The Israeli economy is very vibrant,” Finance Minister Yuval Steinitz said last month. “We enjoy very low unemployment and nice economic growth and this is mainly because we managed to develop very advanced hi-tech industries and very strong exports.”

The stock market in Israel, whose population of 7.8 million is similar to Switzerland’s, was upgraded to developed-market status by MSCI in May last year, the same month the 63-year-old country was accepted into the Organisation for Economic Co-operation and Development. The country has about 60 companies traded on the Nasdaq Stock Market, the most of any nation outside North America after China and is home to the largest number of startup companies per capita in the world.

Israel ranks third in terms of projected growth this year among MSCI’s list of 24 developed economies, after 6 percent for Hong Kong and 5.3 percent for Singapore, according to the IMF.

“Israel’s exports are high-added value exports like informatics and technology,” said Jean-Dominique Butikofer, a fund manager who helps oversee emerging-market debt at Union Bancaire Privee in Zurich, including Israeli bonds. “They’re not exporting Gucci bags. If there’s a slowdown, these are the kind of assets that are good to have.”

Venture-capital backed Israeli technology companies raised $364 million in the second quarter of this year, a 77 percent jump from the year-earlier period, according to a PwC report. Seventy-six companies raised funding in the three-month period, compared with only 60 last year, the report said.

Business Report