Israel

With its long-term trend of stable growth, Israel receives comparatively high rankings (rank 8) in the area of economic policies. Its score on this measure has improved by 0.3 points relative to 2014.

The pandemic led to a sharp decline in economic growth in mid-2020, followed by a quick recovery and modest growth rates thereafter. Deficits rose to 5.5% of GDP in 2020 and 4.6% in 2021. Initially limited financial assistance sharply increased the rate of business failure. Relief ultimately included extended unemployment benefits, household cash benefits and employee retention grants.

Employment rates had improved prior to the pandemic, though remained low by cross-OECD standards. A pandemic-era furlough policy reduced labor-market participation by two percentage points, and is expected to increase long-term unemployment. Ultra-Orthodox Jews and Arab Israelis (particularly men) have particularly low labor-market participation rates.

Tax revenues are comparatively low. The government uses the tax system to favor certain populations. A large share of taxes are indirect, and income taxes force middle-income people to pay proportionately more than high-income peers. The R&D sector is very strong, with international cooperation a particular focus.

With significant concerns over equity, Israel falls into the lower-middle ranks (rank 25) with respect to social policies. Its score in this area has improved by 0.1 point relative to 2014.

Absolute education spending has increased substantially over the last decade, but population growth means that per pupil spending has been stable. Schools for the Arabic-speaking community receive less funding, with these gaps reflected in outcomes. Defense needs had led to the creation of distance learning plans that made adaptation to lockdowns easier than in some other countries.

Organizational shortcomings in the healthcare system meant that the military handled functions such as tracking the spread of COVID-19, and also established quarantine centers. Poverty rates are relatively high, and overall social-spending levels low. Poverty among independent workers increased by almost 20% during the pandemic.

Women disproportionately lost jobs during the pandemic, and about 7% of working mothers did not return to the workforce. Free preschool classes are available for three- and four-year-olds. Integration efforts are primarily directed toward ethnic-Jewish immigrants. Violent crime rates are disproportionately high in Arabic neighborhoods.

Despite some recent progress in climate-change policy, Israel falls into the bottom ranks internationally (rank 37) with regard to environmental policies. Its score on this measure has declined by 0.2 points relative to 2014.

While lagging other OECD countries, Israel has made some progress in reducing greenhouse gas emissions. Targets include a 27% reduction compared to 2015 levels by 2030, and an 85% reduction by 2050. Most power production is based on fossil fuels, but coal is slated to be phased out by 2030, to be replaced largely by natural gas and solar power.

Tax benefits encourage purchase of low-pollution vehicles, but public transportation is underdeveloped. Plans are in place to protect biodiversity and limit air pollution in the Haifa Bay area, but critics say the related processes have been slow.

With insufficient water reserves, the country is a leader in desalination and related innovations. International coordination efforts include a focus on water and desertification issues. A strong industrial sector is dedicated to sustainable water, energy and environmental technologies.

With ongoing tension over its treatment of Palestinians, Israel performs relatively poorly (rank 30) with regard to democracy quality. Its score on this measure has declined by 0.4 points relative to 2014.

Despite generally open and free elections, candidates can be banned for rejecting Israel’s Jewish identity, among other issues. Parties receive private and public funding, with considerable spending oversight and large fines levied for rule violations. Critics argue that a recently passed law diminishing state funding for joint party lists was designed to break up an Arab party group.

The use of emergency regulations, while routine throughout the country’s history, accelerated during the pandemic. Laws and legal proposals infringing on basic democratic principles have become more common. Arabs experience systematic discrimination and infringements of their civil rights, and are politically marginalized.

Progress has been made in recent years with regard to women’s and gay rights. The judiciary is independent and regularly rules against the government. A number of prominent politicians have been involved in corruption scandals, with criminal inquiries into politicians including former Prime Minister Netanyahu common.

Despite its strong government office, Israel falls into the middle ranks (rank 21) with respect to executive capacity. Its score on this measure is unchanged relative to its 2014 level.

Strategic planning and implementation for major issues in Israel are very centralized under the PMO. Draft legislation is developed within ministries, but the PMO is typically involved. Ministerial committees and informal coordination mechanisms are both influential. However, ministries often act territorially, and information sharing is difficult.

A recently implemented RIA program is showing positive signs, but lacks binding guidelines. Public consultation has expanded, but government consultation with specific groups is not transparent, and is often clientelist. Communication during the pandemic was highly uncoordinated, undermining the legitimacy of the measures implemented.

While vaccine and testing programs were very strong during the pandemic, other responses proved far less efficient. Regulations are generally enforced without bias, but there have been numerous investigations into instances in which policy was allegedly slanted toward specific interests. Economic gaps between local governments mean that rich cities can accomplish far more than poor ones.

With some legislative weaknesses evident, Israel falls into the middle ranks internationally (rank 23) with regard to executive accountability. Its score on this measure has declined by 0.4 points relative to 2014.

Parliamentarians have adequate resources. The State Comptroller serves as auditor, but allegations of intimidation and suppression at the office have raised concerns over the quality of audits. The primary data-protection authority lacks the resources and authority to ensure that public institutions comply with data-privacy laws.

Citizens are highly interested in politics, and participate actively. Trust in public institutions aside from the army has plummeted. While the media often focuses on prominent and popular topics, it also produces substantial reporting on policy and long-term strategies.

The large number of political parties vary strongly in their internal decision-making processes. Business organizations are sophisticated and work closely with the government. Social and environmental interest groups formulate relevant policies, and many have legal and research terms that support their policy engagement.