Research (illustration)
Research (illustration)Flash 90

For years it was the pride of the Israeli economy, but today the country’s hi-tech sector faces serious challenges as growth declines and stagnation sets in.

According to a Finance Ministry report published on Sunday, Israel is not producing enough computer science graduates to sustain the hi-tech industry’s growth. That fact has driven wages up, benefiting those who do have the necessary training, but it’s also making Israel less competitive in the global market.

The decline of the industry could be a serious threat to the long term health of the Israeli economy. Widely credited with the tremendous growth Israel’s economy enjoyed in the 1990s, the hi-tech sector employs 12% of the country’s workforce and makes up 9% of its GDP.

But growth has slowed since the 2008 global recession, and since 2010 Israeli hi-tech has grown at half the pace of the economy at large.

The stagnant tech industry has already negatively impacted Israeli exports, which fell substantially in 2015. The hi-tech sector currently makes up 40% of Israeli exports.

The Finance Ministry notes that the malaise facing the tech industry could spread to Israel’s startup sector.