An opportunity for exporters, the bet on Israel can pay off
An article about Israel as a safe investment port in which Nimrod was interviewed for a newspaper in the Czech Republic (published on October 7, 2022)
The article presents Israel as a safe investment port compared to other countries because of its good handling and extensive experience with inflation. The author refers to Israel’s cyber capabilities and the high-tech and electricity sector and asks for Nimrod Yaron’s position regarding the areas recommended for investment in Israel.
Israel is expected to become a quiet investment port due to the assumption that the wave of the current crisis will hardly harm it, relying on the outcome of the crisis of 2008. However, it was not able to avoid completely the inflation and damage to the economy.
This year (2022) also brought with it an increase in inflation, interest rates and a slowdown in the growth of Israeli hi-tech. However, the figures are not as dramatic as in many other countries; The number of insolvency applications has even decreased slightly in recent months and unemployment hovers around three percent. On the other hand, wages do not keep pace with price increases. The real wage, according to Yedioth Ahronoth, decreased by 1.4% compared to last June. There is a very slight decrease in compensation in the high-tech sector, where the bar is much higher than the average salary.
The crisis affects Israel much less compared to other countries thanks to its cyber security capabilities, an area in which it is one of the leading countries in the world – “Cybercrimes flourishes during the economic crisis, which results in an increase of the expenses of companies, in an attempt to protect themselves from cybercrimes”, Says Nimrod Yaron of the Israeli and international taxation company – Nimrod Yaron & Co. He has first-hand information, since he is the one who assists foreign investors in many areas, be it validation, analysis, taxation and/or negotiations with financial institutes.
However, according to him, the situation in other high-tech fields is different: “Ukraine was a supplier of cheap IT power to Israel, so the war also affected the field of research and development”. In addition, in the last year it has been very difficult for startups to get fundings and investors support if they don’t have a finished product in hand. But even those who already have a product, even if it is good one, have a problem with financing: “Investors are now thinking twice about what they are going to be involved in”, Nimrod Yaron describes the situation in the Israeli high-tech sector, a sector that helped the country survive the Corona crisis relatively well.
Annual inflation in Israel now stands at 5.2%, mainly due to global influences. Economists predicts that this is the maximum rate, and that the situation will not get worse from here on. The central bank has already responded by raising interest rates, and apartment prices this year have increased significantly compared to previous years, by about 17%, and the rent by about 4%. As in other places, there was an increase in the price of building materials, and food prices.
Europeans who looks at the prices in supermarkets in Israel will think that prices cannot rise beyond their current level, but this is not the reason why inflation is not expected to rise in the near future: “Israel went through a very traumatic experience with inflation in the early 1980s, when it grew by hundreds of percent,” says Nimrod Yaron, and he is not the only one, Eyewitnesses remember how they did not put price tags in stores because they changed very quickly, so they had to be changed too often. “We learned from this, we haven’t had inflation in Israel in the last 30 years, we already know how to do it,” says Nimrod Yaron and adds that in his estimation that Israel will emerge from this crisis without significant damage.
However, the energy crisis is also manifested in Israel. This is despite the fact that Israel has its own gas, Since there is no pipeline connecting the countries. if there was one – Israel could also supply Europe with it. It has enough solar radiation and desert to install solar panels and it even produces some of its electricity with coal.
Electricity prices have also increased in Israel, although compared to the situation in other European countries, perhaps the prices are too negligible to mention. Many Israeli experts agree that Israel is not utilizing its potential for producing energy from the sun, and there is much room for improvement.
The shekel (NIS) was strong even in 2012, when its rate was only about 5 Czech crowns. In the last five years its value has hovered around 6 crowns and above. In the middle of this year, the shekel rate increased a lot and almost did not drop from 7 crowns, and even came very close to 8 crowns. The trend is similar to the euro currency, and experts predict that the shekel will strengthen even more.
The investment opportunity is not only for Czech exporters. “I would recommend investing in properties,” says Nimrod Yaron to those who would consider using Israel as a quieter port. Despite the cooling, according to him, the investment in Israeli high-tech makes sense – “Companies that manufacture in Israel can pay very low corporate taxes. This is very attractive to Europeans. This is also the reason why important companies such as Microsoft, Apple and Google have opened their centers in Israel,” says Nimrod Yaron, who also helps companies deal with regulations in the Israeli market.
The Russian attack on Ukraine also affected the investment sector: “My European clients want to know who the real owners of companies and startups are. They refuse to work with the Russians, and in Israel, now more than ever, they are interested in environmental technologies and cybernetics”..
At the same time, according to him, cryptocurrencies are getting stronger, and as a result of this crisis some of them may even improve their situation. “Cryptocurrencies are now used to transfer money from Russia and also to a place where governments have ceased to be trusted”, concludes Nimrod Yaron.
