The war in Gaza has also hit the Israeli economy hard: labor shortages and instability repels investors. An improvement can only be expected after the end of the war, and such an improvement is not yet visible, writes ARD.
The war in Gaza has hit the Israeli economy hard. In the construction sector or agriculture, for example, there is a shortage of workers. Particularly important, however, is the high-tech sector in the country, which is defined as “the country of startups”, writes ARD. The industry employs 16 percent of the country's workforce, provides almost half of exports and about a third of tax revenues.
But it is also in crisis, economist Asaf Patir told the German public-law media. “The question is whether the war and the instability it caused, combined with the political instability in Israel over the past year, will have a long-term effect. In the sense that investors perceive Israel as a risky place for investments – something that hasn't happened in the last 20 years.“
A crash in investment
Indeed, investment in Israel's high-tech sector has fallen significantly: in the first six months of the war, capital invested in Israel was 31 percent less than in the six months before the war. Assaf Patir explains to ARD that investments in this sector have fallen all over the world, but in Israel the decline is particularly significant.
A trend started even before the war – with the coming to power of Benjamin Netanyahu's government in 2022. With his far-right and ultra-religious coalition partners, he launched a judicial overhaul that has further divided the country and caused great instability, observers say.
After the war will everything be fine?
The war in Gaza is also a factor – 15 percent of employees in the high-tech sector were called up temporarily into the military. Netanyahu then had to explain why the agencies downgraded Israel's credit rating, and his answer had to sound encouraging: “Israel's macro data is very good, considering that the country is at war. In this context, they are even very very good. The credit score downgrade came about in the first place because we are at war. And when it ends, after we win it, that rating will be immediately restored. I'm ready to bet”, he assured.
Economist Asaf Patir, however, is not ready to subscribe to this. He does not want to be pessimistic, but he is concerned about the future. “There are two options: one is for the war to end and for things to continue to develop at the level of the last 20 years. Or we will see investors start to worry about the situation in Israel. They will probably also worry about the future of Israeli society – whether it will remain liberal and science-oriented”, the expert told ARD.
At the same time, for the high-tech sector in Israel, investors are very important. Asaf Patir says that half of the funds for research and development in Israel come from abroad, that is - the high-tech sector is very dependent on foreign money.
Recovery only after the end of the war
Economic experts like Patir believe that the Israeli economy will be able to recover only after the end of the war. However, he doubts that the current government is making the right decisions: “I am concerned whether the government has the political ability to act responsibly. Economically, it is doing well, but politically it has not shown that it can take fiscal responsibility.“
Predictions on how the Israeli economy will develop are not easy, ARD points out. And he sees the explanation firstly in the uncertainty of how long the Netanyahu government will stay in power, secondly – in the threat of war against Hezbollah in the north, and thirdly – in that for now there is no end in sight to the war in the Gaza Strip.