Israel's war in Gaza is causing disruption in the country's startup and tech sector, with significant economic ramifications. The war has led to destabilization of the workforce, plummeting economic growth, and increased military spending. The podcast explores the experiences of individuals in the startup ecosystem and discusses the potential implications for Israel's economic future.
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Quick takeaways
The war between Israel and Hamas has had a significant impact on Israel's startup ecosystem, leading to structural changes in companies and a decrease in productivity.
The war has had a significant economic toll on Israel, with a forecasted 19% fall in GDP in the last quarter of 2023, raising concerns internationally and necessitating spending cuts and new taxes to address the $30 billion deficit.
Deep dives
Impact of War on Israeli Startup Ecosystem
The war between Israel and Hamas has had a significant impact on Israel's startup ecosystem. Many companies, including legal tech startup Darrow, had to adapt rapidly as employees were called up to serve in the military. The absence of key personnel led to structural changes within companies and a decrease in productivity. The war also caused uncertainty and turmoil within the country, affecting the economy and leading to protests. Prior to the war, Israel's economy relied heavily on its thriving tech sector, attracting multinational corporations and contributing to GDP growth and exports. However, recent challenges such as high inflation and political instability have started to impact the economy negatively.
Economic Consequences of the War
The war has had a significant economic toll on Israel. With a forecasted 19% fall in GDP in the last quarter of 2023, the Israeli government has had to revise its budget to accommodate the surge in expenditure due to the war. The government is facing a $30 billion deficit that needs to be funded through spending cuts and new taxes. The overall uncertainty caused by the ongoing conflict and its economic repercussions has raised concerns internationally, with credit agencies placing Israel on negative review. Future indicators to watch include the state deficit, growth rates, and the potential impact on Israel's sovereign credit rating.
Uncertain Future for Israel's Economy
As the war in Gaza continues, the future of Israel's economy remains uncertain. The impact of the war on both businesses and individuals has been significant, with companies struggling and individuals facing challenges in their daily lives. The government's ability to fund the war and manage the economic fallout will be crucial in determining future fiscal and monetary policies. Israel's high-tech sector, which has played a vital role in the country's economic success, may face challenges due to the ongoing conflict. The aftermath of the war and its long-term consequences will continue to be monitored closely.
Over the last few decades, Israel has transformed itself from a relatively poor agrarian economy to a global startup haven. Its per capita GDP now exceeds that of France, the UK and Japan. But with Hamas’ attack on Israel – which killed 1,200 people and claimed more than 200 hostages – and Israel’s subsequent invasion of Gaza, that economic trajectory could be at risk.
Some 360,000 Israeli reservists were called to serve in the military in the days that followed October 7th, destabilizing Israel’s workforce, while economic growth is forecast to have plummeted in the last quarter of 2023. And as Israel continues its invasion of Gaza – a war that has already claimed the lives of more than 25,000 Palestinians, according to Hamas officials – Israel’s military spending is expected to balloon. The country’s just-released 2024 budget calls for $19 billion in war-related expenditures.
On today’s Big Take podcast, Israelis involved in building the country’s vibrant start-up ecosystem share their stories of how the aftermath of October 7th has impacted their employees and the community’s operations – and Bloomberg’s Galit Altstein walks us through what it could all mean for Israel’s economic future.
This episode was produced by: David Fox Senior Producers: Naomi Shavin and Gilda Di Carli Editors: Caitlin Kenney and Jordan Fabian Executive Producer: Sage Bauman Sound Design/Engineer: Blake Maples and Alex Sugiura Fact-checker: Adriana Tapia Special thanks to Galit Altstein and Israel bureau chief Ethan Bronner for the reporting that inspired this episode.
Have questions or comments for the team? Reach us at bigtake@bloomberg.net.