Israel experiences 60% drop in FDI in first quarter of 2023

In value terms, this amounts to $2.6 billion, in sharp contrast to the total of $29.32 billion in 2022

TEL AVIV, Israel – Israel has experienced a dramatic 60% drop in foreign direct investment (FDI) in the first quarter of 2023 compared to quarterly averages in recent years.

In value terms, these amounted to $2.6 billion, in sharp contrast to the total of $29.32 billion in 2022.

Historically, the top investors in Israel have been the U.S., which accounted for 72% of FDI, and the UK, with 8% in 2022.

More than half of these investments in 2022 were in IT and business software.

The average value of high-tech exits in Israel has also declined, falling 80% to $56 million in the first quarter of 2023 from an average value of $307 million in previous years.

This decline is partly due to falling valuations of technology companies in the U.S. and the decline in company values in financing rounds.

Local and global uncertainties are a major cause of the decline in foreign direct investment in Israel.

Israel has experienced unprecedented political and social turmoil, primarily due to a government-proposed overhaul of the judiciary.

This change has led to widespread protests and concern among economists about the potential adverse effects on the economy.

Prof. Dan Ben-David warns that current policies could have disastrous long-term effects on the country’s future.

In 2022, the high-tech sector was central to the Israeli economy, accounting for 18.1% of GDP.

The proposed legislative changes could deter foreign investors attracted to Israel’s innovation, as they may find the environment less stable for investment.

Finance Minister Bezalel Smotrich, however, dismissed the concerns, attributing them to political battles against the right-wing government’s proposed changes to the judicial system.