Israel Matzav: Israel's economy exceeds that of the OECD

Monday, January 25, 2010

Israel's economy exceeds that of the OECD

Israel is up for admission to the OECD in the near future, and we keep hearing about how we're on the verge of being ready to be classified as a developed rather than a developing economy. Yoram Ettinger points out in an email that we are far better than OECD countries in many ways:

1. London Economist (January 2010): Israel's 2009 economic performance, in face of global meltdown, suggests impressive growth in 2010. Israel's GDP grew in 2009 by 0.5%, compared to an average 3.5% decline in OECD countries: US - 2.5% decline, Japan - 6.5% decline, Germany - 4.9% decline, Britain - 4.7% decline, Italy - 4.8% decline, Ireland - 7.5% decline, etc. The Economist projects a 3.7% growth for Israel's 2010 economy and less than 7% unemployment (7.7% in 2009), compared with a 2.4% OECD growth and 8.8% OECD unemployment. Israel's inflation is projected to be 1.7%, compared to 3% in 2009 and OECD's inflation of 1.2% (1.3% in 2009).

Morgan Stanley raises growth forecast for Israel to 3.7%, beyond Bank of Israel's forecast of 3.5% (Globes, Jan. 18, 2010).

Israel's Central Bureau of Statistics (ICBS) reported (Israel Hayom daily, Jan. 1, 2010) a 2.9% budget deficit (% of GDP), which is higher than the 0.8% of 2008, but dramatically lower than most Western economies, some of which exceeded 10%. The ICBS also reported a 6.5BN trade balance surplus, a 75% increase in the Tel Aviv Stock Exchange and a 1.3% decline of GDP per capita, compared with a 2.2% increase in 2008.

2. Israel's high-tech holding its own. The number of Israeli high-tech companies, which enticed investment, remained high (447 compared with 483 in 2008), attesting to the attraction of Israel to venture capitalists. The volume of dollar invested decreased significantly, as a result of drying investment resources and lower market valuations: $1.1BN in 2009, in comparison with $2BN - 2008, $1.8BN - 2007, $1.6BN - 2006, $1.3BN - 2005, $1.5BN - 2004 and $1BN in 2003 (Ma'ariv, Jan. 19).

3. Microsoft expands R&D operations in Israel, adding a few scores of employees to the 600 currently employed (Globes, Jan. 6).

4. Merger & Acquisition of Israeli companies persist. DVTel acquired Israel's Ioimage for $80MN in stock (Globes, Jan. 13). DotHill acquired Israel's Cloverleaf for $113MN (Globes, Jan. 6).

5. Overseas VC investment in Israel. China's $1BN Zhejiang Sanhua invested $9.5MN in Israel's Heliofocus (Globes, Jan. 6). Europe's FilVest, which specializes in bio-med investment, led a $12MN round of private placement by Israel's Endogen - FilVest's first investment in Israel (Globes, Jan. 11).

Oracle, Pennsylvania's Susquehanna Growth Equity, Silicon Valley's Hyperion, Boston's Battery Ventures and Briatain's Stage One Ventures co-led a $10MN round of private placement by Israel's cVidia (Globes, Jan. 15). invested $9MN in Israel's Wisair (Globes, Jan. 12). Sequoia Capital participated in a $3MN fourth round by Israel's SunRad (Globes, Jan. 19). Virginia Life Sciences Investments led a $3MN seoncd round of private placement by Israel's Cupron n(Globes, Jan. 20).

I had a meeting yesterday with money managers who suggested that Israeli high tech companies are now eschewing VC funds because the funds took too high a percentage of their companies. Hmmm.