(photo credit: INGIMAGE PHOTOS)
The level of foreign direct investment (FDI) in Israel dropped 46 percent between 2013 and 2014, according to the 25th World Investment Report, released Wednesday by the United Nations Conference on Trade and Development (UNCTAD).
The drop from $11.8b. to $6.4b. brought Israel to its lowest level of FDI since 2010. The 46% decrease was significantly larger than the general 16% drop in global FDI and the 28% drop in FDI to developing countries.
Globally, the decline in FDI came from the “fragility of the global economy, policy uncertainty for investors and elevated geopolitical risks,” the UN report said.
FDI is considered a crucial element for increasing productivity and output.
Israel’s productivity is notoriously low and is often cited as a factor behind high levels of poverty and inequality.
“With the increase in the labor-force participation rate likely to level off and unemployment already at record lows, future employment growth will likely slow to the rate of working-age population – some 1.5 percent,” the International Monetary Fund wrote in its annual article IV consultation Wednesday. “If productivity does not pick up, GDP growth will slow accordingly.”
The report also found that cross-border mergers and acquisitions in Israel fell from $3.3b. in 2013 to $2.3b. in 2014, although that figure is higher than most in the last several year. Globally, cross-border M&A transactions grew from nearly 28% from $312b. to $399b. However, a PWC survey earlier this year had different results, finding that Israeli exits in 2014 amounted to some $5b.
Regardless, the UN report noted a dramatic increase in Israel’s stock of FDI over the years, which grew from $4.5b. in 1990 to $20.4b. in 2000 and $98.7b. in 2014.