Israel vs. Gaza Strip

Israel has a technologically advanced free market economy. Cut diamonds, high-technology equipment, and pharmaceuticals are among its leading exports. Its major imports include crude oil, grains, raw materials, and military equipment. Israel usually posts sizable trade deficits, which are offset by tourism and other service exports, as well as significant foreign investment inflows.

Since March 2020, economic growth has slowed compared to recent historical averages, but Israel's slump has been less severe than in other Middle Eastern countries because of its swift vaccine roll-out and diversified economic base. Between 2016 and 2019, growth averaged 3.6% per year, led by exports. Israel's new government is hoping to pass the country's first budget in two years, which, combined with prudent fiscal policy and strong global trade ties would probably enable Israel to recover from economic challenges caused by the COVID-19 pandemic.

Natural gas fields discovered off Israel's coast since 2009 have brightened Israel's energy security outlook. The Tamar and Leviathan fields were some of the world's largest offshore natural gas finds in the last decade. In 2020, Israel began exporting gas to Egypt and Jordan.

Income inequality and high housing and commodity prices continue to be a concern for many Israelis. Israel's income inequality and poverty rates are among the highest of OECD countries, and there is a broad perception among the public that a small number of "tycoons" have a cartel-like grip over the major parts of the economy. Government officials have called for reforms to boost the housing supply and to increase competition in the banking sector to address these public grievances. Despite calls for reforms, the restricted housing supply continues to impact younger Israelis seeking to purchase homes. Tariffs and non-tariff barriers, coupled with guaranteed prices and customs tariffs for farmers kept food prices high. Private consumption is expected to drive growth through 2021, with consumers benefitting from low inflation and a strong currency.

In the long term, Israel faces structural issues including low labor participation rates for its fastest growing social segments - the ultraorthodox and Arab-Israeli communities. Also, Israel's progressive, globally competitive, knowledge-based technology sector employs only about 8% of the workforce, with the rest mostly employed in manufacturing and services - sectors which face downward wage pressures from global competition. Expenditures on educational institutions remain low compared to most other OECD countries with similar GDP per capita.

Movement and access restrictions, violent attacks, and the slow pace of post-conflict reconstruction continue to degrade economic conditions in the Gaza Strip, the smaller of the two areas comprising the Palestinian territories. Israeli controls became more restrictive after HAMAS seized control of the territory in June 2007. Under Hamas control, Gaza has suffered from rising unemployment, elevated poverty rates, and a sharp contraction of the private sector, which had relied primarily on export markets.

Since April 2017, the Palestinian Authority has reduced payments for electricity supplied to Gaza and cut salaries for its employees there, exacerbating poor economic conditions. Since 2014, Egypt's crackdown on the Gaza Strip's extensive tunnel-based smuggling network has exacerbated fuel, construction material, and consumer goods shortages in the territory. Donor support for reconstruction following the 51-day conflict in 2014 between Israel and HAMAS and other Gaza-based militant groups has fallen short of post-conflict needs.

see entry for the West Bank

see entry for the West Bank

see entry for the West Bank