Economy of Israel

The economy of Israel is a highly developed free-market economy. The prosperity of Israel's advanced economy allows the country to have a sophisticated welfare state, a powerful modern military said to possess a nuclear-weapons capability with a full nuclear triad, modern infrastructure rivaling many Western countries, and a high-technology sector competitively on par with Silicon Valley. It has the second-largest number of startup companies in the world after the United States, and the third-largest number of NASDAQ-listed companies after the U.S. and China. American companies, such as Intel, Microsoft, and Apple, built their first overseas research and development facilities in Israel. More than 400 high-tech multi-national corporations, such as IBM, Google, Hewlett-Packard, Cisco Systems, Facebook and Motorola have opened R&D centers throughout the country.

The country's major economic sectors are high-technology and industrial manufacturing. The Israeli diamond industry is one of the world's centers for diamond cutting and polishing, amounting to 23.2% of all exports. As the country is relatively poor in natural resources, it consequently depends on imports of petroleum, raw materials, wheat, motor vehicles, uncut diamonds and production inputs. Nonetheless, the country's nearly total reliance on energy imports may change in the future as recent discoveries of natural gas reserves off its coast and the Israeli solar energy industry have taken a leading role in Israel's energy sector.

Israel's quality higher education and the establishment of a highly motivated and educated populace is largely responsible for ushering in the country's high technology boom and rapid economic development by regional standards. The country has developed a strong educational infrastructure and a high-quality business startup incubation system for promoting cutting edge new ideas to create value-driven goods and services. These developments have allowed the country to create a high concentration of high-tech companies across the country's regions. These companies are financially backed by a strong venture capital industry. Its central high technology hub, the "Silicon Wadi", is considered second in importance only to its Californian counterpart. Numerous Israeli companies have been acquired by global multinational corporations for their profit-driven technologies in addition to their reliable and quality corporate personnel.

In its early decades, the Israeli economy was largely state-controlled and shaped by social democratic ideas. In the 1970s and 1980s, the economy underwent a series of free-market reforms and was gradually liberalized. In the past three decades, the economy has grown considerably, though GDP per capita has increased faster than wages. Israel is the most developed and advanced country in West Asia, possessing the 17th largest foreign-exchange reserves in the world and the highest average wealth per adult in the Middle East (10th worldwide by financial assets per capita). Israel is the 9th largest arm exporter in the world and has the highest number of billionaires in the Middle East, ranked 18th in the world. In recent years, Israel has had among the highest GDP growth rates within the developed world along with Ireland. The Economist ranked Israel as the 4th most successful economy among developed countries for 2022. The IMF estimated Israel's GDP at US$564 billion and its GDP per capita at US$58,270 in 2023 (13th highest in the world), a figure comparable to other highly developed countries. Israel was invited to join the OECD in 2010. Israel has also signed free trade agreements with the European Union, the United States, the European Free Trade Association, Turkey, Mexico, Canada, Ukraine, Jordan, and Egypt. In 2007, Israel became the first non-Latin-American country to sign a free trade agreement with the Mercosur trade bloc.