Israel Country Risk Report

Published 23 June 2015 | Quarterly

  • 52 pages
  • Instant access to your report online and PDF format through your account library
  • Includes 3 free updated quarterly reports
$1,195.00
Israel Country Risk Report

Core Views

  • Political risks remain elevated despite truce between Israel and Islamist group Hamas in 2014, as highlighted by protracted violence since the ceasefire. Prime Minister Benjamin Netanyahu controls a coalition with a majority of just one seat in the Knesset and it is likely that it will not be able to see out its four year term. The economy will experience a modest pickup in growth over the coming quarters, driven mainly by private consumption.

Major Forecast Changes

  • We have revised our interest rate outlook to the downside, given that inflation will likely reach just 1% by the end of 2015. As a result, the Bank of Israel will maintain its policy rate at 0.10% until the end of 2015, and gradually hike it in 2016 to reach 0.50% by the end of the year.

Key Risks To Outlook

  • A delay in the Fed hiking its policy rate would lead to the shekel appreciating sooner than we anticipate. The export sector - which accounts for 35% of GDP - would suffer from a strengthening currency.

  • The ultra-Orthodox push to roll back on reforms implemented in the previous years could lead to the long-term fiscal outlook being significantly weakened in addition to lowering productivity growth in the long-run.

Macroeconomic Forecasts (Israel 2013-2016)
Indicator 2013 2014 2015f 2016f
National Sources/BMI
Real GDP growth, % y-o-y 3.2 2.8 3.1 3.4
Nominal GDP, USDbn 290.6 303.8 291.7 320.8
Consumer price inflation, % y-o-y, eop 1.8 -0.2 1.0 1.9
Exchange rate ILS/USD, eop 3.47 3.90 3.80 3.75
Budget balance, % of GDP -3.3 -2.9 -2.2 -3.1
Current account balance, % of GDP 2.4 3.0 3.6 3.3
Executive Summary
5
Core Views
5
Major Forecast Changes
5
Key Risks To Outlook
5
Chapter 1: Political Outlook
7
SWOT Analysis
7
BMI Political Risk Index
7
Foreign Policy
8
Change Required Before Relations With US Can Recover
8
Table: Political Overview
8
Long-Term Political Outlook
10
Long-Lasting Peace With The Palestinians Unlikely
10
Chapter 2: Economic Outlook
13
SWOT Analysis
13
BMI Economic Risk Index
13
Economic Activity
14
Slight Pickup In Growth In The Coming Years
14
Table : Economic Activity
14
Fiscal Policy
16
Deficit To Shrink Gradually
16
Table : Fiscal Polic y
16
Exchange Rate Policy
17
ILS: Marginal Appreciation In 2015
17
Table : BMI Currenc y Forecast
17
Monetary Policy
18
No Further Rate Cuts In H115
18
Table : Monetar y Polic y
19
Chapter 3: 10-Year Forecast
21
The Israeli Economy To 2024
21
Encouraging Growth Prospects Over The Coming Decade
21
Table : Long -Term Macr oec onomic Forecasts
21
Chapter 4: Operational Risk
23
SWOT Analysis
23
Operational Risk Index
23
Operational Risk
24
Table: Operational Risk
24
Availability Of Labour
25
Table : MENA - Availabilit y Of Lab our Ris k
26
Table : Lab our Force Empl oyment By Sect or ('000)
28
Table : Top 10 Source Countries For Migrant Workers
29
Crime Risk
30
Table : MENA - Crime Ris ks
30
Table : Crime Statistics
31
Chapter 5: Key Sectors
35
Automotives
35
Food & Drink
38
table : Food Consumpti on Indicat ors - Hist orical Data & Forecasts
40
Other Key Sectors
43
Table : Oil and Gas Sect or Ke y Indicat ors
43
Table : Pharma Sect or Ke y Indicat ors
43
Table : Infrastructure Sect or Ke y Indicat ors
43
Table : Telec oms Sect or Ke y Indicat ors
44
Table : Defence and Securit y Sect or Ke y Indicat ors
44
Table : Freight Ke y Indicat ors
44
Chapter 6: BMI Global Macro Outlook
45
Global Outlook
45
Deflationary Pressure
45
Table : Global Assumpti ons
45
Table: Developed States, Real GDP GrowtH, %
46
Table : BMI VERSUS BLOO MBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
46
Table : Emerging Mar kets , Real GDP Growth , %
47

The Israel Country Risk Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Israel. It is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market.

An influential new analysis of Israel's economic, political and financial prospects through end-2019, just published by award-winning forecasters, BMI  Research.

Key Uses

  • Forecast the pace and stability of Israel's economic and industry growth through end-2019.
  • Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
  • Assess the critical shortcomings of the operating environment that pose hidden barriers and costs to corporate profitability.
  • Contextualise Israel's country risks against regional peers using BMI's country comparative Risk Index system.
  • Evaluate external threats to doing business in Israel, including currency volatility, the commodity price boom and protectionist policies.

The Israel Country Risk Report by BMI  Research includes four major sections: Economic Outlook, Political Outlook, Operational Risk and Key Sector Outlook.

Economic Outlook:

How will the Israel' economic policy-making and performance impact on corporate profitability over 2015-2019?

BMI provides our fully independent 5-year forecasts for Israel through end-2019 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.

Economic Outlook Contents

The Israel Country Risk Report features BMI's forecasts with supporting analysis for 2015 through to end-2019, set against government views and BMI's evaluation of global and regional prospects.

Key Areas Covered:

Data:

  • Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
  • BMI's comprehensive Risk Index system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.

Written Analysis:

  • Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
  • Balance of Payments - trade and investment, current and capital account.
  • Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
  • Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
  • Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
  • Foreign Direct Investment - approvals, inflows and climate.
  • External Debt - debt profile (short and long-term plus public and private sector obligations).
  • Global Assumptions - forecasts for each year to end-2019 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.

Key Benefits

  • Rely upon BMI's 100% independent forecast scenarios for Israel and underlying assumptions - we take no advertising and are privately-owned.
  • Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on Israel, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
  • Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.

Political Outlook:

What are the political risks to doing business in Israel over the next 5-years?

BMI's Israel country Risk Index evaluates the short- and medium-term threats to political stability.

Political Outlook Contents

  • SWOT Analysis for the Israel Market - Political Strengths, Weaknesses, Opportunities and Threats facing Israel.
  • Political Stability and Risk Assessment - BMI's Risk Index assesses explicit short- and long-term risks to political stability; latest positioning and trends for Israel's risk are compared with regional and global averages.
  • Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.
  • Long-Term Political Outlook BMI examines the structural risks to the stability of Israel’s political system and the dominant public policy issues likely to affect decision-makers, and outlines scenarios for how the state could evolve in the medium to long term.

Key Benefits

  • Benchmark Israel's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
  • Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
  • Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.

Operational Risk

What are the current operational risks and difficulties associated with doing business in Israel?

The Operational Risk section gives an evaluation of current risks and difficulties associated with operating in the market. It also provides a brief overview of the regional Operational Risk Index which benchmarks Israel against its neighbours.

Operational Risk Contents

The chapter provides a summary of the main threats in the country, within:

  • Labour Market Risk (Education; Availability of Labour; and Labour Costs)
  • Logistics Risk (Market Size and Utilities; Quality and Extent of the Transport Governance)
  • Trade and Investment Risk (Economic Openness; Government Intervention; and Legal Risks)
  • Crime and Security Risk (Crime; Terrorism; and Interstate Conflict risks).

The report also drills down in greater depth to address key issues in one of the following segments most critical to the market:

  • Transport network, economic openness, cost and availability of labour, crime risks, bureaucratic environment, market size and utilities, and interstate conflict.
  • Assess your company’s exposure to country specific operational and business risks, using BMI’s insight on the current dangers of operating in the market.
  • Evaluate Israel’s risk profile against its regional peers, helping you understand the market’s strengths and weaknesses in relation to other countries.

Key Sector Outlook*

Which industry sectors in Israel will grow fastest, and where are the major investment opportunities in the market?

BMI identifies investment opportunities in Israel's high growth industries including automotives, defence & security, food & drink, freight transport, infrastructure, oil & gas, pharmaceuticals & healthcare and telecommunications & IT.

Key Areas Covered:

  • Market Overview - Size and value of each industry, including recent sector developments and major industry key performance indicators (KPIs) that have impacted company performance.
  • 5-year Industry Forecasts - Forecasts for each year over 2015-2019, using BMI's proprietary industry modelling technique, which incorporates key domestic and international indicators - including economic growth, interest rates, exchange rate outlook, commodity prices and demographic trends - to provide fully integrated forecasts across and within each industry.
  • Demand- and Supply-Side Data/Forecasts - BMI's industry data covers both the output of each industry and the domestic demand, offering clear analysis of anticipated import/export trends, as well as capacity growth within each industry.

Key Benefits

  • Target strategic opportunities in high growth industries, which are benefiting from global mega trends, and thus offer strong investment and growth opportunities.
  • Compare the growth path of different industries to identify which are best placed to benefit from domestic and international economic prospects, and which have historically suffered from volatile growth trends - a key indicator of future risks.

*Not all Country Reports contain the Key Sector Outlook chapter. Please enquire above for more information.

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