Israel's most striking economic achievement is the rate at which it has developed while simultaneously dealing with the following enormously expensive challenges:
• Maintaining national security: Israel now spends around 8 percent (as against over 25% in the 1970s and 23% in 1980) of its GDP on defense. Even in eras of relative calm, Israel must retain a strong deterrent capability.
• Absorbing large numbers of immigrants: The "ingathering of the exiles" is practically the raison d'etre of the Jewish state. Since its inception, Israel has absorbed more than 3 million immigrants, more than five times the number of Jews living in the country when it attained independence in 1948. In its first four years alone, Israel's population more than doubled as 700,000 immigrants, mostly refugees from postwar Europe and Arab states, poured into the country.
Since 1990 another wave of 1.2 million immigrants (940,000 from the former Soviet Union alone), required enormous outlays for their physical and social absorption. However, much faster than the previous waves of immigration, these newcomers soon contributed to accelerating the GDP growth - though also temporarily increasing unemployment to an 11.2 percent high in 1992. This was gradually reduced to below 6 percent before the financial crisis struck.
• Establishing a modern economic infrastructure: Although basic networks of roads, transportation, port facilities, water, electricity, and communications existed in 1948, they were far from adequate, requiring enormous outlays for their development and expansion. Without this huge investment in communications and transportation, much of the expedited growth of the economy could have never occurred.
• Providing a high level of public services (health, education, welfare, etc.): As Israel is committed to ensuring the well-being of its population (with special concern for the weaker elements in the society) a continuously growing proportion of its resources had been devoted to meet these obligations. Recent budgets have placed a special emphasis on education and other programs aimed at investing in the country’s future workforce while helping to close the income gap.