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Israel and Palestinian Authority, Economy

The challenges of maintaining national security while absorbing and integrating massive waves of immigrants have characterized the economy of Israel throughout its statehood. Defense spending remains one of the worldís highest per capita, and immigration strains the availability of jobs and housing. Lack of natural resources and economic isolation from surrounding Arab states add further challenges. In spite of these factors, Israelís economy has grown rapidly, and Israelis enjoy a high standard of living. With a total gross domestic product (GDP) of $110.39 billion in 2000, Israelís per capita GDP of $17,710 was one of the highest in the world. Economic diversification, high investment, a skilled and educated workforce, and a commitment to research and development have contributed to Israelís economic success. Nevertheless, a steadily increasing trade deficit, high inflation (averaging 9.7 percent in the period 1990-2000, down from more than 400 percent in 1984), and reliance on foreign loans and aid threatened the economy through the late 1990s. To offset its trade deficit, Israel continues to pursue the export of high-technology products. If lasting peace in the Middle East could be achieved, Israel would undoubtedly benefit from increased trade with its Arab neighbors and less of a need for defense spending. In 1998 Israel proposed a plan to phase out economic aid from the United States over a period of 10 to 12 years beginning in the year 2000.

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