One of the oldest areas of the world has suddenly become the hot new spot for exchange traded fund (ETF) investors.

In recent years, Israel has benefited from high global domestic product growth (GDP), a low rate of inflation, a disciplined budget, strong currency and a skilled workforce. It’s all added up to a growing economy with room left to grow, according to a presentation by Steven A. Schoenfeld, chief investment officer for Northern Trust, which launched an ETF focused on the TA-25 earlier this year.

In fact, Israel is going to graduate from “advanced emerging” status to Developed Market Status in FTSE’s index this September. MSCI is looking into graduating Israel sometime in 2009; the Dow Jones Wilshire and Russell Global Indexes already include it as a developed market.

The challenge on graduation day is going to be for Israel to stand out among those already developed markets.

GDP growth for Israel in 2005 was 5.2%, compared with 3.2% for the United States. While the forecasts for 2008 have it slowing to 3.3%, it’s still on pace to outperform the United States’ growth, predicted to be 0.8%.