The longest war in Israel’s history has hit its economy hard, but analysts find cause for optimism as foreign investment bounces back and high tech hangs on.
More than a year into the most expensive war in Israel’s history, Its leaders are eyeing the economic toll while cautiously finding some good news.
The war disrupted everything from agriculture to tourism to foreign investment to the nation’s vaunted high-tech sector.
With Israel emerging from a seven-front war as the Middle East’s dominant force, its economy, too, shows resilience.
According to the Bank of Israel, the Israeli economy expanded at a healthy annual rate of 3.8 percent during the third quarter, far stronger than the anemic 0.3 percent of the previous quarter.
A key index on the Tel Aviv Stock Exchange, the TA-125, on Dec. 30 showed the Israeli stock market up more than 28 percent for the year and at an all-time high.
Home buying, which signals economic recovery, is up.
Of great concern were the war’s effects on high tech, an ever-growing part of the economy, a source of pride for the so-called “Start-Up Nation,” and a key to its critical security needs.
An Exodus of Professionals?
High tech accounts for 16 percent of Israel’s employment, 20 percent of its economic output, more than half of its exports, and a third of its income taxes.
Investment in the high-tech sector dropped 30 percent in the first year of the war, according to a report released by the Israel Advanced Technology Industries and the RISE Israel Research and Policy Institute.
Some tech professionals, like other Israelis with foreign options, fled the country after Hamas’s devastating attack on Oct. 7, 2023. Foreign companies reportedly hesitated to invest there, preferring to house critical operations abroad—where airports and offices weren’t under rocket attack.
But end-of-year financial reports showed a rebound. Foreign investment in Israel in the first half of 2024, $11.8 billion, proved significantly stronger than that in the first half of 2023, which was $7.3 billion, not including a one-time $15 billion investment by Intel in a new microchip plant.
