Foreign investments in Israel rebound after decline caused by political instability, war
Finance Ministry sees $11.8 billion inflow during the first half of 2024 versus $7.2 billion year-over-year, discounting the one-off $15 billion deal by chip giant Intel
Sharon Wrobel is a tech reporter for The Times of Israel.
Two years of internal political instability alongside almost 15 months of war have taken a heavy toll on the flow of foreign investments into Israel. But preliminary data for the first six months of this year show some signs of a recovery in overseas trade deals driven by increased activity in the May to June quarter, the Finance Ministry said in its annual foreign investments report for 2023.
The value of foreign investment deals in Israel in the first half of the year stood at $11.8 billion, marking a decline of 28 percent versus the same period in 2023, but an increase of 15% compared to 2022. However, 2023 also included a one-off $15 billion investment by US chip giant Intel for the expansion of a major factory project in Kiryat Gat, in the south of Israel. Not including the Intel investment, total deals in the first half of 2023 amounted to about $7.2 billion.
“Current data for 2024 shows a growing trend in foreign investment transactions in Israel, and we expect the improvement in the security and political environment to support the trend in the future,” said Finance Ministry chief economist Shmuel Abramzon.
“The Finance Ministry continues to work even during this period to expand Israel’s trade agreements to create a supportive environment for increased investments and to enable the diversification of investment sources available for the Israeli economy,” he added.
Abramzon noted that 2023 was characterized by political, economic, and security challenges in Israel and in the world, which negatively affected the flow of foreign investments.
Israel is marking almost 15 months since war erupted, triggered by the October 7, 2023, terror onslaught in southern Israel, in which Hamas-led terrorists murdered some 1,200 people and took 251 hostages to Gaza. With higher defense and civilian spending on the war effort, the Bank of Israel has estimated that the total costs of the fighting could rise to NIS 250 billion by the end of 2025.
At the beginning of 2023, the local market was overshadowed by growing political uncertainty around the government’s proposed judicial overhaul and fears that the proposed changes to the legal system would threaten the independence of the judiciary and make business and investment less predictable.
Foreign direct investment into Israel dipped by 29% last year versus 2022, according to OECD data. The slowdown was led by a sharp plunge of 68% in foreign investments in the last three months of 2023 with the outbreak of war, which eroded economic activity and increased uncertainty that affected the ability to attract investments from abroad, the Finance Ministry said.
Meanwhile, data collected by the Finance Ministry, which also includes figures from the Central Bureau of Statistics and other international bodies, showed that foreign investment in Israel totaled $32.9 billion in 2023, up 40% from the $23.5 billion registered in 2022. Not including the Intel mega deal, foreign investment amounted to about $18 billion, a decline of 24% from 2022 and the lowest level since 2019.
Abramzon remarked that “the global trend of a slowdown in the flow of foreign investments in 2023 did not escape Israel.”
“The volume of transactions in Israel in 2023 stood out favorably against the background of Intel’s giant investment deal, while we were negatively affected mainly in the fourth quarter because of the war,” he added.
Only 1,563 foreign investment deals were closed last year, compared with 2,502 in 2022. Sector-by-sector analysis found that 48% of foreign investment in 2023 was parked in the semiconductor industry, 31% went to IT, and 6% to life sciences. Among the most prominent deals in 2023 were the $3.6 billion acquisition of Imperva by French giant Thales S.A., and the $1.2 billion investment by India’s Adani Group in Haifa Port.
In 2023, the US-led investments in Israel with $24 billion, followed by France with $3.7 billion, India with $1.2 billion and the UK with $1.1 billion, according to Finance Ministry data.
