Annual Report - 2010
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THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Required Report - public distribution Date: 12/6/2010 GAIN Report Number: IS1013 Israel Exporter Guide Annual Report - 2010 Approved By: Cynthia I. Guven Senior Agricultural Attaché U.S. Embassy, Cairo Prepared By: Gilad Shachar, Agricultural Marketing Specialist Report Highlights: Israel is a net food importer. It is a strong market for U.S. agricultural exports, such grains, oilseeds, dried fruits and prepared food products. The current exchange rate of the U.S. dollar versus the Euro, which continues to favor U.S. sales, combined with the expected 4.1 percent GDP growth for Israel in 2010 and the Agreement on Trade in Agricultural Products (ATAP) between the U.S. and Israel, offer good opportunities for American agricultural and food products in Israel. Data for the first ten months of CY 2010 show that agricultural and food imports from the U.S. increased by 11 percent from the same period one year ago (from $361 million to $402 million). Post: Tel Aviv Executive Summary: Main Changes Compared to Previous Year Report Since the second quarter of 2009, Israeli economy experienced high constant growth, indicating a fast recovery from the global economic crisis. GDP is estimated to grow by 4.1 percent and 4.0 percent in 2010 and 2001, respectively compared with 0.8 percent in 2009. The Israeli economy demonstrated a high level of stability compared to other countries throughout the global economic crisis. World Economic Forum (WEF) Global Competitiveness Index 2010-2011: The WEF ranked Israel 24th out of 139 countries for 2010-2011. On May 27th, 2010 Israel officially joined as a full member in the OECD. Data from January through October 2010 show total imports of goods (excluding diamonds, aircrafts and ships) increased by nearly 23 percent compared to the same period one year ago (from $33.7 billion to $41.5 billion) and if economic situation will continue to improve both globally and in Israel it is estimated that demand for all goods will continue to increase in 2011. Data from January through October 2010 show total exports of goods (excluding diamonds, aircrafts and ships) increased by nearly 19 percent compared to the same period one year ago (from $29.0 billion to $34.5 billion). In 2011, exports are estimated to grow by 6 percent compared to 2010. However, since EU concern grew over a debt crisis in several countries, combined with the fact that the EU is Israel’s main trade partner, exports forecast may be changed in the forthcoming months and will also affect Israel’s GDP. Data from January through October 2010 show total agricultural and food imports increased by 19 percent compared to the same period one year ago (from $2.97 billion to $3.52 billion). Agricultural and food imports from the U.S. increased by 11 percent to $402 million in 2010 (till October). The expected improved economic activity in 2011 both globally and in Israel, combined with the weakening dollar, is expected to continue to boost demand for U.S. agriculture products in Israel in 2011. Annual household consumption expenditure in 2009 totaled $42,190 (2% up from 2008), of which 16.3% ($6,877) was directed to food purchases. As a result of the global economic recession, food purchases percentage decreased from 17.2% in 2008 to 16.3% in 2009. As a result of the improved economic situation, food purchases expenditure are expected to increase in 2010 and 2011. Section I: Market Overview Economic and Demographic Situation Israel is a lively democracy of more than 7.6 million people: 75% Jewish (5.7 million) and 20.2 percent Arabs, mainly Muslims. The annual population growth rate is 1.8 percent. Despite the global economic recession, actual and predicted effects on the Israeli economy were much less than those worldwide. The reason for Israel coming through the crisis in better shape than other countries lies in the economy's strong starting position: a responsible fiscal policy and balanced budget, a falling public debt/GDP ratio, and a lower rate of household debt than in other countries. The Central Bureau of Statistics (CBS) predicts that Israel's GDP will grow by 4.1 percent in 2010 compared with 0.8 percent in 2009. Israel’s economic growth eased in the third quarter of 2010. GDP grew in the third quarter of 2010 at an annual rate of 3.8 percent, compared with a rate of 4.5 percent in the second quarter of 2010. GDP in 2009 totaled NIS 698 billion ($183 billion). Israeli economic growth in 2010 has been led by exports. As a result of the improved economic activity in 2010, data from January through October 2010 show total exports of goods (excluding diamonds, aircrafts and ships) increased by nearly 19 percent compared to the same period one year ago (from $29.0 billion to $34.5 billion), and the bank of Israel expects a 17 percent rise in exports in 2010 compared with last year. Exports constitute 40–45 percent of Israel's GDP. In 2011, exports are estimated to grow by 6 percent compared to 2010. However, since EU concern grew over a debt crisis in several countries, combined with the fact that the EU is Israel’s main trade partner, exports forecast may be changed in the forthcoming months and will affect Israel’s GDP forecasts. Israel is a member in leading international economic organizations: WBG, IMF, WTO, and OECD. On May 27th, 2010 Israel officially joined as a full member in the OECD. World Economic Forum (WEF) Global Competitiveness Index 2010-2011: The WEF ranked Israel 24th out of 139 countries for 2010-2011. Chart 1: GDP, Annual Growth Rate Source: CBS CPI in 2010 is forecast to decrease to 2.5 percent, compared to 3.9 percent in 2009. Since the beginning of 2010, the CPI has increased by 2.2 percent. Excluding the housing component, it has increase by 1.5 percent. With inflation at 3.9 percent in 2009, Israeli inflation exceeded an official annual target of 1 to 3 percent. Excluding energy, the CPI decreased by 0.6 percent in 2009. Due to the global and local economic slowdown, during the first eight months of 2009 the Bank of Israel reduced the key interest, however in fear of rising inflation the Bank of Israel lifted the Key Interest Rate for the fifth time since August 2009. The Bank of Israel was the very first central bank to implement any rate increase following the world recession. Currently the key interest rate stands at 2.0 percent (11/2010), compared to a 0.75 and 3.27 percent in November 2009 and 2008, respectively. Initial data on unemployment shows a decline to 6.5 percent unemployment in the third quarter of 2010 with unemployment approaching pre-crisis levels. In 2009, unemployment increased by nearly 25 percent compared to 2008 (from 6.1 to 7.6 percent). In 2009, the number of work seekers totaled 229,500 people. In addition to the local employment force, there are about 200,000 foreign workers, mainly from Thailand, Philippines, and Eastern Europe, and 47,000 workers from the Palestinian Authority. Foreign workers work mainly in the Agricultural sector, construction, restaurants and elder care services. During the period between October 2009 and October 2010, the US dollar weakened by 3 percent against the Israeli shekel, and the euro weakened by 9 percent against the Israeli shekel. The strengthening of the Israeli shekel was supported by the positive indicators relating to Israel's economy. It is expected that the Israeli shekel will continue to trade between ILS3.6/US$ and ILS3.9/US$ in the short term. Chart 2: U.S. Dollar and Euro to Israeli Shekel Exchange Rate Source: CBS, Israel Israel Food Processing Industry As a result of the global economic recession, the food and drink industry turnover decreased by about 2 percent in 2009 compared to 2008. However, the food and drink industry is one of the largest manufacturing industries in Israel, with a turnover of $15.2 billion 2009. As a result of the improved and projected global economic situation the expected local HRI market growth rate in the next few years is 2-4 percent annually. The HRI market, including the army, hospitals, hotels, restaurants and other places of employment, is valued at about $7.2 billion. Over 50 percent of the total food supply directed at non-institutional consumers is sold through supermarkets and retail chains. Two major supermarket chains with hundreds of outlets throughout the country dominate the retail food market. For further information, see Israeli Food Processing Sector Report: http://www.fas.usda.gov/gainfiles/200603/146176957.pdf Chart 3 data – Unchanged from the previous year. Chart 3: Food Processing Industry Value, by Sub-Sectors, Percent, CY 2009 Source: The Food Industries Association, Manufactures’ Association of Israel Consumer Buying and Eating Habits Main Facts: Annual household consumption expenditure in 2009 totaled $42,190 (2% up from 2008), of which 16.3% ($6,877) was directed to food purchases. As a result of the global economic recession, food purchases percentage decreased from 17.2% in 2008 to 16.3% in 2009. Where do they buy food? 60% - Supermarket chains, 16% - Grocery shops, 5% - open markets, and 19% - other shops. Supermarkets share increased from 56 percent in 2008 to 60 percent in 2009. On the other hand, grocery shops and open markets shares decreased compared to 2008 (grocery stores from 19% to 16% and open markets from 6% to 5%).