Foreign investment in Israel plunged 60% in first quarter of 2023 — Finance Ministry data

Foreign investment in Israel has dived by 60% in the first quarter of this year, a report published by the Finance Ministry shows.

Israel lured about $2.6 billion in foreign investment in the first three months of the year, reflecting a 60% decline compared to the average quarterly figures recorded in 2020 and 2022, according to the data. A drop was seen in both the number of foreign transactions and the number of foreign investors during the first quarter of the year.

The report does not compare 2023 figures with 2021 as it was a record year and is seen as an outliner.

Citing data by the Central Bureau of Statistics, the report notes that foreign direct investment in the first quarter of 2023 fell 34% to $4.76 billion, versus the quarterly averages recorded in 2020 and 2022.

In addition, the average size of exit transactions — mergers and acquisitions or initial public offerings of shares — in the first quarter plunged 80% to $56 million from about $307 million in 2020 and 2022. The Finance Ministry attributes part of the sharp drop to the decline in the valuations of many technology companies in the US.

Last year, foreign investment transactions amounted to $29.3 billion following a record year in 2021 which saw a staggering flow of $47 billion, according to the data. That compares with the $26.4 billion in foreign investment recorded in 2020.

In the second half of 2022, investments in private companies slowed amid rising interest rates, a global stock market fall and tech layoffs. Adding to this is the local political uncertainty around the contentious judicial overhaul announced earlier this year, which has been pushing foreign investors into a wait-and-see position about deal-making.

In 2022, about 72%, or $21 billion, of foreign investments to Israel came from the US, similar to the percentage in the previous year. Another 8%, or $2.4 billion, made up investments from the UK.