Will the Strong Shekel Give Israel’s Tech Sector a Boost?

The shekel is plummeting in value to levels not seen in three years. This is considered a negative for the Israeli consumer because it can weaken their purchasing power at home and abroad. However, one silver lining of a devalued shekel is its benefits for the tech industry.

Although Israel’s tech sector reached record levels of fundraising during the pandemic, the end of 2022 and early 2023 has seen an easing of tech’s momentum. The cause is the global slowdown and an expected correction in the sector. However, the weaker shekel may boost the tech sector and make these companies attractive to Israeli investments.

Slowing Shekel–Not Necessarily a Bad Thing

Although an environment of higher interest rates usually leads to a strengthening in the value of a nation’s currency, the opposite has happened in Israel. In the past few months, the Bank of Israel has tightened interest rates to combat inflation, but the shekel is at its lowest level in 3 years.

As of the first week of March, the dollar was worth 3.649 shekel and the euro was at a rate of 3.888 shekel. This is a monthly gain of 7% for the dollar against the shekel and 6% for the euro.

The main cause of the weaker shekel is the controversy over proposals to overhaul and limit the power of Israel’s judiciary which has caused alarm among economists and worries about the future of the Startup Nation’s valuation. This may not be a welcome development for the tech sector, but the resulting devaluation of the shekel may provide temporary relief for tech companies.

Although it can’t be denied that a weaker shekel takes its toll on the consumer, particularly with regard to overseas travel and energy prices, it can make tech companies more competitive.

Since tech startups often raise money in dollars and pay their workers in shekel, there’s no mystery that tech executives may greet a weaker shekel as welcome news. With a dip in the value of the shekel, Israeli products may appear more attractive and provide a significant value proposition.

Although The reason for the weakening shekel may not be ideal and civil division is a challenge for Israeli society and the economy, in the meantime, the weak shekel may be a bright spot for Israeli startups.

Invest in Israel’s Tech Sector

Weakness in the global tech sector and in the shekel can be a win for investors. Now is a good time to add Israeli tech and other Israeli investments to your portfolio. Although there may be some challenges in the short-term, in the long-term, Israel’s tech sector will continue to be strong.

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