Israel’s High-Tech Sector Slows Down in 2023
Israel’s high-tech sector, which has been the fastest growing industry in the country for the past decade, is experiencing a slowdown in 2023. The state-backed Israel Innovation Authority has reported that the political turmoil in the country has exacerbated the situation, and Israel may be detaching from the global trend of a tech recovery. High-tech is crucial for Israel’s economic growth, accounting for almost a fifth of GDP and 14 percent of jobs. However, startup investment has decreased by almost half, and job recruiting has slowed down due to a global tech downturn that began in the second half of 2022.
Political Turmoil and Foreign Investors’ Concerns
The Innovation Authority has warned of a backlash from senior figures in Israel’s tech industry and foreign investors’ concerns about continued investment in Israel. The country’s political turmoil, including Prime Minister Benjamin Netanyahu’s push to overhaul the judicial system, has caused volatility in the shekel and sparked mass protests. The highly-contested plan would limit the power of the Supreme Court, drawing warnings from credit rating agencies. A number of tech firms have reported moving funds out of Israel, while foreign inflows have slowed sharply. New startups are increasingly domiciling abroad.
Separation Trend between Israeli High-Tech Industry and Global Trends
The Innovation Authority has expressed concern about a separation trend between the Israeli high-tech industry and global trends. Usually, there is a link between two quarters after US stock markets begin to recover, as seen in a rise of the Nasdaq index this year. Capital raising and employment in Israel would be expected to increase. However, based on the indications presented so far, supported by April and May data, there is a genuine concern of a separation trend between the Israeli high-tech industry and global trends. So far in 2023, the Nasdaq has risen 29 percent, while Israel’s main technology index is up 7.8 percent.
Bank of Israel Governor’s Observation
Bank of Israel Governor Amir Yaron has made a similar observation, pointing out that 50–80 percent of high-tech firms were registering overseas, up from 20 percent last year. “Insofar as this trend persists, it may have an adverse effect on the economy in the long term,” Yaron said. The Innovation Authority has also warned that Israel’s high-tech sector may be detaching from broader trends that point to a global recovery.
Conclusion
Israel’s high-tech sector has been crucial for economic growth, accounting for almost a fifth of GDP and 14 percent of jobs. However, the industry is experiencing a slowdown in 2023 due to a global tech downturn and political turmoil in the country. The Innovation Authority has warned of a separation trend between the Israeli high-tech industry and global trends, and foreign investors’ concerns about continued investment in Israel. Bank of Israel Governor Amir Yaron has also expressed concern about the trend of high-tech firms registering overseas. If this trend persists, it may have an adverse effect on the economy in the long term.