1. If you define “democracy” as a government based on free elections where the winner of the elections runs the country, Israel is clearly a democracy. There are two caveats. One is that if one considers “Eretz Yisrael” rather than “Medinat Yisrael”, Israel is clearly not a democracy since about 40% of the inhabitants (the Palestinians not holding Israeli citizenship) can’t vote. Second, many Israeli use the word “democratic” to mean “secular” and Israel is not exactly a secular state sine much of its culture and laws reflects Jewish perspectives.
2. Economically, Israel is now considered to be a developed country, though as is the case in many countries, not everyone gets to benefit. The Upper class tend to be secular and westernized, with the result that many Israelis are “left out” of the mainstream economy, and left trapped in the “third world” economy of the frum communities, the peripheral communities and the Palestinian Arab communities. Israel has one of the most unequal distributions of wealth of any of the developed countries (unlike 70 years ago, when Israel was clearly a developing country, but with very little economic inequality).