Op-ed: After crisis, Israel’s economy always comes back stronger

Op-ed: After crisis, Israel’s economy always comes back stronger

Visitors enter the Tel Aviv Stock Exchange in Tel Aviv, Israel, on Tuesday, Nov. 7, 2023.

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Anchored in a culture of entrepreneurship and adaptability, Israel is globally recognized as the world’s “Startup Nation” for its cross-sector contributions to modern research and technology. However, the horrific events of October 7 shifted our focus from innovation to self-defense. In just a few hours, the nation of Israel went from business as usual to national emergency and national mourning.

Throughout this ongoing crisis, the resilience of Israel’s economy has once again taken center stage. Despite the challenging security situation, Israeli companies have stood strong in demonstrating business continuity and delivering world-class services to customers across the globe. This should be no surprise, as resilience has always been a key tenet of Israel’s long-term success, military or otherwise.

Examples, unfortunately, abound: Whether during the global financial crisis of 2008-09, Operation Protective Edge in 2014 or other past challenges, Israel’s GDP, exports and foreign direct investments have always bounced back from crises stronger than ever. Most recently, the Covid-19 pandemic struck a terrible blow to Israel’s economy in the second quarter of 2020, reducing GDP by roughly 30% annualized. But Israel quickly rebounded, growing nearly 40% the following quarter and more than 8.5% the next year, well above the OECD average of 5.7%. 

Before the tumultuous days of the Second Lebanon War, Warren Buffett chose Israel as the destination for Berkshire Hathaway‘s first international investment — buying 80% of Iscar, a metalworking company located near the Lebanese border, valuing it at $5 billion. When the conflict began, Buffett was resolute, and maintained his investment despite Iscar’s proximity to the border and its frequent exposure to rocket attacks. This clear-eyed, long-term decision ultimately yielded substantial gains. By the time Buffett bought the remaining stake in Iscar in 2013, its valuation had doubled to $10 billion.

This rebound was reflected in the Israeli economy as a whole. The Tel Aviv Stock Exchange’s flagship TA-125 Index dropped over 8% in that war’s opening days, but took only 40 days to recover to pre-war levels. Similarly, following the attacks of October 7, the TA-125 fell over 12%, and as expected, returned almost fully to its prewar territory in just two months.

Numerous initiatives emerged immediately after the Hamas attacks to support affected companies. Vehicles such as the Israeli Innovation Authority’s (IIA) Fast Track funding mechanism alongside private sector designated funds and business support tools such as SAFE Dome, Iron Nation and the Frontline Initiative quickly materialized. Israel’s Ministry of Economy with its 45 overseas economic missions held and continues to hold hundreds of investment events in a global effort to support Israeli startup companies, while the Ministry of Finance recently quadrupled the IIA’s Fast-Track Fund as it adapts and responds to the evolving needs of Israeli companies.

Beyond top-down initiatives, we are witnessing a continued stream of private investment in Israeli startups as well as additional recognition by international business leaders in the quality of Israeli innovation. Examples from just last week include Israeli data security startup Mine’s raising a $30 million Series B co-led by PayPal Ventures, and the release of a McKinsey report naming Israel as No. 1 in the world in terms of both investment per capita and as a share of GDP for the rapidly expanding mobility sector.

It is also noteworthy that 15 Israeli companies have been selected to CNBC’s Disruptor 50 list since its establishment, among the highest national counts after the U.S., and including four companies from the 2023 list: Wiz, Orca Security, Snyk and BeeHero. This is especially impressive since both now and in past conflicts, Israel’s tech sector employees were drafted to defend their homeland. Many startups found their team members on the battlefield by day and managing their business by night.

As Israel’s Economic Minister to North America, I have personally witnessed more visits to Israel than I can count conducted by investors and business leaders during the past two months — visits to show solidarity as well as to promote business opportunities. The U.S. Chamber of Commerce, the world’s largest business organization, strongly condemned the terrorist attacks and has led the American business community in providing humanitarian and other support to Israel. Leaders of over 850 leading venture capital firms issued a bold statement of support for Israel, encouraging the global venture community to “support and engage with Israeli startups, entrepreneurs, and investors.”

It is evident that Israel is already rebounding, and it’s the most knowledgeable and seasoned investors who are taking advantage of this profound opportunity. Even in this moment of difficulty, Israeli innovators and entrepreneurs are already looking ahead to the day after. Israel’s innovation ecosystem continues to offer myriad possibilities for collaboration, investment and business partnerships. Our message to the world is clear: Israel is and always will be open for business. No matter what.

 —By Anat Katz, Economic Minister to North America for Israel’s Ministry of Economy and Industry

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