Foreign Investment in Israel Climbs Despite Challenges

Israel is witnessing a remarkable surge in foreign investment, with preliminary figures from the first half of 2024 showing a 15% increase compared to the same period last year. The Chief Economist’s Office of Israel’s Finance Ministry released its annual report highlighting $11.8 billion in investments over 910 deals in just the first six months. This uptick marks a significant turnaround after a challenging 2023.

Despite the global economic slowdown, Israel's hi-tech sector attracted substantial foreign interest, with more than $1 billion invested in October alone. First-quarter investments totaled $4.4 billion, while the second quarter soared to $7.4 billion. These figures point to renewed confidence in Israel’s innovation-driven economy.

However, 2023 presented a different picture, as foreign investment in hi-tech fell 24%, with only 1,563 deals finalized a sharp decline from 2,502 deals in 2022. Major transactions like Thales SA’s $3.6 billion acquisition of Imperva and Adani Group’s $1.2 billion purchase of Haifa Port somewhat cushioned the blow. Sectoral investment was dominated by semiconductors (48%), IT (31%), and life sciences (6%).

The United States continued its leadership in Israeli investments, contributing $24 billion, or 73% of total foreign inflows. France followed with $3.7 billion, reinforcing Israel's global appeal.

According to Chief Economist Shmuel Abramzon, “The global trend of a slowdown in foreign investment flows in 2023 also affected Israel. Yet, data for 2024 indicates a growth trend in foreign investment deals, supported by improved security and political stability.”

Still, challenges loom large. The ongoing conflict with Hezbollah has left northern Israel in need of repairs estimated at over 5 billion shekels ($1.4 billion). Additionally, Iran's October missile attacks resulted in damages of approximately $40 million.

The financial strain has forced the Israeli government to revise its economic strategy. Growth projections have been lowered, and significant budget cuts exceeding $10 billion aim to manage a deficit reduction target of 4% of GDP from the current 8.1%. Beginning January 2025, VAT will rise to 18%, potentially costing Israeli households between 1,000 to 2,000 shekels annually.

Despite these hurdles, the surge in foreign investment reflects global confidence in Israel's resilience and its unparalleled innovation. As the country addresses economic and security challenges, its robust entrepreneurial spirit continues to attract partners worldwide.

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