Is it expensive to live in Israel?

Israel: Expensive food and rents put a strain on the population

Even the prime minister was ecstatic. “Israeli genius! Israeli pride, ”Benjamin Netanyahu tweeted in mid-March. The occasion was the largest technology deal in the country's history. The US group Intel wants to take over the chip and software company Mobileye and leaves around 15 billion dollars for it. A new proof of the leading position of Israeli companies in high technology.

In fact, the small country with just 8.5 million inhabitants has blossomed into an important high-tech location in recent years. This ensures impressive growth rates, lets the shekel keep increasing in value and also drives stock prices.

But the population only benefits to a limited extent. Because there is hardly any other country where life is at the same time as expensive as in Israel. The reasons for this are partly a consequence of the political situation, but partly also homemade.

The economy grows vigorously every year

The technology sector has been one of the most important branches of the Israeli economy for around two decades. In the mid-1990s, the government and companies began investing a lot of money, and spending on research and development quickly increased from around 2.5 percent to over four percent of economic output.

This already paid off during the high-tech boom around the turn of the millennium. In 2000, the technology group Lucent took over the Israeli fiber optic company Chromatis for 4.7 billion dollars - until the recent announcement of the acquisition of Mobileye, the largest deal in the history of the Israeli high-tech industry.

Share prices on the Tel Aviv Stock Exchange also rose rapidly at the time - and collapsed by almost half after the bubble burst. But they also quickly recovered. Today the TA-35 index is almost three times as high as it was at the peak of 2000, because economic output has also increased strongly year after year since 2004, mostly between three and six percent. In 2016 it was four percent, and the International Monetary Fund (IMF) is expecting just under three percent for the current year. Part of this can be explained by the steady population growth, but part also by the successful technology groups.