preface

1. THE ISRAELI ECONOMY IN 2010
1.1. FOREWORD
A steady improvement in the world economic situation has been evident since
the second quarter of 2009. Not only did the global equity markets rebound and
risk premiums on lending fall, but international trade and global industrial
production have also been recovering markedly with an increasing number of
countries registering positive quarterly growth in gross domestic product
(GDP). The massive policy incentives provided by governments worldwide
since the end of 2008 has triggered the economic revival.
From mid-2010, global economic growth began losing pace - a trend expected
to continue through 2011. Future outlooks are unclear, as great uncertainty and
serious downside risks remain. Future recovery may continue to suffer if some
downside risks occur, while positive outcomes may be anticipated through
strengthened international policy coordination. The growth in world gross
product (WGP) is 3.6% for 2010.
The United States of America is on its way to recovering from the recession,
although historically this is its weakest post-recession recovery. Growth is
expected to decline further - from 2.6% in 2010 to 2.2% in 2011. At these rates,
the GDP level will resume its pre-crisis peak by 2011, while full employment
recovery is expected to take at least another four years, leaving the output level
well below potential.
The growth forecasts for Europe and Japan are no brighter. Although Germany
is moderately recovering, predictions for the Euro area expect a stagnation in
GDP growth of 1.3% in 2011, compared with 1.6% growth in 2010. However,
several European countries, where drastic fiscal cuts and continued high
unemployment are draining domestic demand, are expected to show lower
growth rates. Japan, which initially recovered strongly from the financial crisis
owing to the boost in its net exports, began staggering in the course of 2010.
Due to constant deflation and an elevated public debt, its economy is expected
to grow by only 1.1% in 2011.
In 2010, the Israeli GDP increased by 4.5%, compared with 0.8% growth in
2009 and 4.2% growth in 2008.
BDO Israel
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