Israel’s economic journey in recent years has been a story of contrasts: remarkable resilience and record-breaking achievements juxtaposed with deep challenges stemming from geopolitical conflict and economic adjustments. The latest data from Israel's Finance Ministry paints a complex picture of growth, investment, and the toll of adversity.
Record Investment Amid Global Downturn
Preliminary numbers for the first half of 2024 indicate a 15% surge in foreign investment, reflecting renewed confidence in Israel's economic potential. This comes on the heels of a remarkable 40% jump in foreign investment in 2023, when inflows reached an impressive $32.9 billion, compared to $23.5 billion in 2022.
Foreign investments in Israel surged in H1 2024, hitting $11.8B despite war. Top deals in 2023 included Intel $15B investment, Imperva $3.6B merger with Thales, and Adani Ports $1.2B in Haifa Port. US led with $24B, followed by France ($3.7B), India ($1.2B), and the UK ($1.1B).
— BigBreakingWire (@BigBreakingWire) December 25, 2024
Yet, the 2023 figures tell a nuanced story. A single massive deal — Intel's $15 billion expansion of its Kiryat Gat semiconductor factory — accounted for much of the surge. Excluding Intel's contribution, foreign investment totaled $18 billion, a 24% decline from 2022. Additionally, the number of deals fell sharply to 1,563, a 62% drop from 2022's 2,502 deals.
Despite global trends showing a 20% decline in foreign direct investment (FDI), Israel stood out. Other prominent transactions included:
- Thales S.A.’s $3.6 billion acquisition of Imperva.
- Adani Group’s $1.2 billion investment in Haifa Port.
The tech-driven economy maintained its appeal, with 48% of investments directed toward the semiconductor sector, 31% to IT, and 6% to life sciences. The United States remained Israel's largest investor, contributing $24 billion (73%) of the total, followed by France with $3.7 billion.
3 amazing facts about the Israeli economy in 2024!
— Hamas Atrocities (@HamasAtrocities) December 24, 2024
💥 The Israeli stock exchange performed better in 2024 than S&P 500 and Stoxx Europe 600
💥 Israel Foreign Direct Investment (FDI) increased by $5.6B in Sep 2024, compared with an increase of $6.3B in the previous quarter.
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Challenges from Conflict and Economic Strain
However, beneath these impressive figures lie significant hurdles. The ongoing conflict with Lebanon's Hezbollah has ravaged Israel's northern regions, with damages exceeding 5 billion shekels ($1.4 billion). Compounding this devastation, the October 1 missile attack by Iran inflicted damages estimated at $40 million, further straining resources.
The war's toll on Israel's economy is stark:
- The Finance Ministry reduced growth projections for 2024, citing instability and heightened expenditures.
- The government enacted $10 billion in budget cuts to stabilize finances and limit the deficit to 4% of GDP, down from its current 8.1%.
- To address these fiscal challenges, VAT will rise to 18% starting January 2025, an increase expected to cost Israeli households between 1,000 and 2,000 shekels ($274–$548) annually.
Optimism for the Future
Preliminary 2024 data supports that the outlook for the future, given Israel's resilience and the current level of activity is positive. With investment activity rebounding and renewed interest in Israel's defense sector after 14 months of fighting a war on multiple fronts, the outlook for Israel is good according to many analysts. Israel's strategic focus on high-tech sectors, coupled with global investors' confidence, positions the country for continued economic advancement.
Israel ranked no. 6. It seems we have weather the storm. As of Q32024, foreign investment is back to early 2021 level, the currency reserves are rising, and the performance of the Tel Aviv 125, outpaced even the S&P 500. Are there problems? Yes, many, but we are climbing. pic.twitter.com/MtxNkGcKOL
— Rachel Gur (@RachelGur) December 23, 2024
Balancing Growth and Resilience
Israel's economic trajectory is a testament to its ability to attract global capital despite adversity. However, the challenges posed by conflict, fiscal adjustments, and infrastructure rebuilding require decisive action. Policymakers face the dual task of fostering growth while ensuring fiscal sustainability, with the hope that a robust investment landscape will help offset the economic costs of conflict.
In the face of unparalleled challenges, Israel’s resilience and innovation remain its greatest assets, offering hope for a balanced and prosperous future.