Fall in exports worries Israeli manufacturers

The Manufacturers Association of Israel expressed concern over figures released earlier this week by the Central Bureau of Statistics, which showed negative per capita growth of 0.4% in the second quarter, while GDP grew by 1.2% year-on-year.

Business output fell 1.9% in the second quarter compared to the first quarter and by about 5% compared to the same quarter last year. In addition, exports of goods and services fell by more than 7% year-on-year.

The manufacturers’ association says the situation is more worrying than official figures suggest, with shrinking staff, production, products and exports due to the war.

Between January and June 2024, industrial exports fell by 4.7%. The Manufacturers Association’s biggest concern is that the worst is yet to come and it finds it difficult to be optimistic about an imminent recovery. According to the Manufacturers Association, industrial production accounts for about 12% of Israel’s GDP and the damage it has suffered is also reflected in the overall economy. The affected industries include electronics, software, textiles, chemicals, pharmaceuticals, environmental quality, food, metals, electricity, consumer goods and construction.

fear of wasted year

“The decline in GDP becomes a broader problem when we realize that the return to what it was in the past will not happen quickly, let alone the growth needed to narrow the ballooning deficit,” said Ron Tomer, chairman of the Israeli Manufacturers Association. “Companies are not returning quickly to doing business with Israel, the war and the pessimistic sentiment about the Israeli economy, companies are moving elsewhere, causing fear that 2025 will in many cases be a lost year. We are concerned that even after the war they will not necessarily come back here.”

According to the Manufacturers Association, the volume of Israeli exports is now closer to its level of about three years ago. Total industrial exports have fallen from $5 billion a month to just $4.4 billion today. The Manufacturers Association says this has been the case even before the end of the war, and that “the situation could get worse.”

In response, the Ministry of Economy and Industry noted that despite the weakness in industrial exports in the first half of 2024, the data is not “shocking” given Israel’s situation. The ministry says the figures for the last quarter of 2023 were better than 2022, which was a strong economic year and very good for exports.







The ministry also stresses that a recovery in industrial production is on the horizon.

shortage of workers in factories

Since the beginning of 2024, the number of workers in the industrial sector has decreased by 1.4%. In the last quarter of 2023, the number of workers decreased by 2.3% compared to the last quarter of 2022. The Manufacturers Association claims that it is not about the efficiency of the industrial sector – but about the consequences of the war. According to Tomer, these are not workers who are simply moving to another profession, but “exiles from the North and South, reservists, people who are not there for a long time and are absent from factories and industries.”

The shortage of workers is hurting productivity and wage growth. Data provided by manufacturers shows that productivity has not risen at all this year, but they say the situation is worse than it seems at first glance. “The zero growth figure is a bit confusing, and if we look deeper, we see that our situation has worsened. The comparative figure was indeed zero, but there was a decline in industrial output and a corresponding decline in working hours for employees.”

Complexities Surrounding the Budget

Uncertainty in the industry is also growing due to the delay in preparing the 2025 budget. The manufacturers’ association says: “The uncertainty is growing and is hurting the economy’s ability to recover. The deficit is growing and we are expected to enter the fourth quarter of the year without a structured budget for 2025. During a crisis like this, one of the worst the country has seen, no one has time to waste and we must convey to investors that it is business as usual.”

This article was published in Globes, Israeli Business News – en.globes.co.il – on August 21, 2024.

© Copyright Globes Publisher Itonut (1983) Ltd., 2024.


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