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Commercial Department: Beyond Our Borders: October 2018


Beyond Our Borders

Although the Jewish people have deep historical roots in the Middle East, Israel was formally declared a modern nation-state only after Britain withdrew from Palestine in 1948. The country subsequently fought a number of wars to secure its place in its ancient homeland. Israel does not have the only claim to the land, however, and although its high-tech industry has elevated the economy, conflicts with the neighboring Palestinian population persist.

Israel’s gross domestic product (GDP) growth, which had averaged nearly 5 percent between 2004 and 2013, slowed to an average of 2.8 percent between 2014-2017, according to the CIA World Factbook. The agency attributes the economic slowdown to decreased investment in the country resulting from its security challenges.

In the first three months of 2018, Israel’s economy grew at an annualized rate of 4.5 percent, the same growth rate the country saw in the last quarter of 2017, according to Newsweek. In June 2018, Prime Minister Benjamin Netanyahu announced that the country’s per capita GDP had risen to $42,115, ahead of Japan and just behind the United Kingdom.

The country’s Finance Ministry announced this past July that Israel’s economy appeared to have slowed in the second quarter of 2018, however. The ministry anticipated weak growth rates and warned that a global trade war could harm Israel’s economy, according to Reuters. The ministry forecasts 3.5 percent GDP growth in 2018, while the Bank of Israel projects 3.7 percent growth.

Israel is home to a vibrant high-tech sector and is regarded as a startup hotbed. Some $5.24 billion was invested in Israeli startups last year, up 9 percent from the year prior, according to Newsweek. The tech sector is so hot, in fact, that the industry is grappling with a significant labor shortage that could stymie further economic growth.

Despite the success of Israel’s high-tech industry, the country still struggles with income inequality and poverty. Income inequality based on disposable income rose during the 2000s. Inequality has declined in recent years, but remains among the highest in advanced economies, according to the International Monetary Fund (IMF). 

Additionally, poverty is rising, particularly among the country’s Arab and ultra-orthodox Jewish Haredi populations. According to the IMF, the country suffers from low labor productivity, with overall productivity rising by only three-quarters of a percent annually in recent decades.

The country’s infrastructure is lacking: Cross-country benchmarks indicate that the country has a public infrastructure gap of around 35 percent to 40 percent of GDP. Public-transportation infrastructure in major cities is particularly inadequate for the needs of the country’s growing population, and congestion is expected to worsen, the IMF states. The Israeli government reportedly has a strategy to fund infrastructure projects through 2030. 


Steven Wyble is the former online content editor of Scotsman Guide Media. For questions about this article, call (800) 297-6061 or

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