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Israel's foreign investments drop 60% in first quarter of 2023

A report published by Israel's Finance Ministry suggests that foreign investments are decreasing, as are the number of Israeli startups sold to foreign companies.
Demonstrators lift flags during a protest against the Israeli government's judicial overhaul bill, in front of the stock exchange complex in Tel Aviv on July 18, 2023. The proposals have divided the nation and triggered one of the biggest protest movements in Israel's history since being unveiled in January by the hard-right government of Prime Minister Benjamin Netanyahu. (Photo by Menahem KAHANA / AFP) (Photo by MENAHEM KAHANA/AFP via Getty Images)

A report issued on Wednesday by the Finance Ministry indicates that foreign investment transactions in Israel in the first quarter of 2023 amounted to about $2.6 billion — a decrease of 60% compared to the same periods in 2022 and 2020.

The report, drafted by the ministry’s chief economist, Shmuel Abramson, inspects foreign investments and trade agreements around the globe and in Israel in 2022, and also includes data for the first three months of this year. 

The report states, "The decrease is reflected in both the number of transactions and the number of investors — both decreased by a third compared to past years.’’

It also says that the average exit transaction, when an Israeli startup is sold to an international company, decreased by approximately 80% to $56 million in the first quarter of 2023, down from about $307 million in the same period in 2022 and 2020.

According to the report, part of the decrease is due to the drop in the value of many technology companies in the United States. The report cites global difficulties such as inflation and the Russian invasion of Ukraine as reasons for a global economic setback. It also notes that the decrease in Israel could be attributed to ‘’local and international uncertainties.’’ 

The report does not address directly the judicial overhaul plan pushed by the Netanyahu government. In fact, it notes, ‘’Israel's economy stands out favorably against the [instability] trends described above." In 2022, it said, Israel's economy grew by 6.5%, compared to the average of 2.8% in the OECD countries.

Finance Minister Bezalel Smotrich admitted Monday that Israel’s economy is not as good as he had expected. In the preface of a report edited by Abramson on macro-economic trends in Israel and presented to the Knesset's financial committee this week, Smotrich wrote that the country’s economy is strong, but added that inflation "is worse than we expected when the budget was presented." He cited the weakness of the shekel, which in the past few days has reached 3.81 against the US dollar, exceeding the 3.60 average annual rate predicted in Israel’s state budget.

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