Israel’s economic freedom score is 68.0, making its economy the 43rd freest in the 2022 Index. Israel is ranked 2nd among 14 countries in the Middle East and North Africa region, and its overall score is above the regional and world averages.
The Israeli economy slowed from 2017 through 2019, turned negative in 2020, and recovered in 2021. A multi-year expansion of economic freedom that peaked in 2020 skidded sharply this year to a low not seen since 2013. With an increase in the government integrity score unable to overcome a steep drop in fiscal health, Israel has recorded a 1.7-point overall loss of economic freedom since 2017 and has fallen from the “Mostly Free” category to the “Moderately Free” category. Monetary freedom, trade freedom, and investment freedom reflect strength, but labor freedom and government spending remain areas for improvement.
IMPACT OF COVID-19: As of December 1, 2021, 8,199 deaths had been attributed to the pandemic in Israel, and the government’s response to the crisis ranked 41st among the countries included in this Index in terms of its stringency. The economy contracted by 2.4 percent in 2020.
Israel won its war for independence in 1948, and its vibrant democracy remains unique in the region. Israel’s high-technology sector attracts considerable foreign investment, and large offshore deposits of natural gas have improved its energy security and balance-of-payments prospects. Despite a 2006 war against Hezbollah in Lebanon, frequent military campaigns against Hamas in Gaza, and the constant threat of terrorism, Israel’s modern market economy is fundamentally sound and dynamic. Israel’s 2020 normalization agreements with Bahrain, the United Arab Emirates, Morocco, and Sudan should encourage greater regional trade, investment, tourism, and technological and strategic cooperation.