As the global economic landscape faced headwinds in 2023, Israeli businesses navigated through a challenging year marked by a slowdown in the tech sector, political unrest, and an unexpected war with Hamas. In light of the country’s current hurdles, Eran Mordechai, CEO of Danal Human Resources at Danel Group, shared his insights on the trajectory of the Israeli economy and potential scenarios for 2024.
“2023 began with a significant global slowdown in the tech sector, which affected Israeli tech and was characterized by a halt in investments in the sector and even a dramatic erosion in the value of companies worldwide and in Israel," he said. The situation worsened with ongoing protests and a complex political environment, creating a ripple effect across various sectors of the Israeli economy.
The war, however, brought about unexpected shifts in employment dynamics. Mordechai pointed out that while tech, retail, advertising, and agriculture suffered declines, the defense and security sectors saw increased demand for employees. "The war accelerated growth in the defense and various companies in the security sector, and the industry experienced high demand for employees and many recruitments," he stated, highlighting the adaptability of certain sectors to the new geopolitical reality.
Current Crossroads and Government Response
“Currently, the economy is at a crossroads leading to stagnation," Mordechai emphasized, expressing concern about the slow government reaction and the absence of organized solutions for affected industries. "The labor market post-war depends on the end date of the conflict and the economic plan to assist small and large businesses," he added.
The CEO highlighted two potential scenarios for 2024. "If there is strong and significant economic support from the state - we can survive the crisis and move from a deficit to a state of growth and workers recruitment in various sectors of the economy," Mordechai stated. Conversely, without substantial support, he warned of the potential for "massive layoffs and the economy will sink into deep recession." The timing of the conflict resolution and the economic plan's effectiveness will play a crucial role in determining the trajectory of Israel's economic recovery.
Extended Impact into 2024
Mordechai also raised concerns about the war's potential spillover into 2024. "If the war extends into the first quarter of 2024, it will affect the entire year because the economic market takes time to recover," he explained. Sectors such as the hotel and tourism industry are particularly vulnerable due to the continued occupation of evacuees, preventing them from entering the economic whirlwind.
As Israel stands at this economic crossroads, the decisions made in the coming months will shape the nation's recovery and set the stage for the business landscape in 2024. The collaboration between the government and businesses will be pivotal in determining whether the Israeli economy can emerge resilient from the challenges of 2023 and the ongoing conflict with Hamas.