Jerusalem, 28 August, 2025 (TPS-IL) — Israel’s economy dodged a fiscal crisis last year thanks to its high-tech sector, which has become the country’s economic lifeline and a magnet for global investment, according to a report released on Wednesday.
The study, conducted by Startup Nation Central and the Aaron Institute for Economic Policy at Reichman University, argues that Israel’s innovation economy is no longer just a “startup nation” but a “scale-up powerhouse” with disproportionate weight in both national stability and international competitiveness.
High-tech now generates 19% of Israel’s GDP, makes up 56% of exports, and contributes more than a quarter of tax revenues, despite employing only about 10% of the workforce. In 2024, the sector helped turn what was projected to be a 10% GDP deficit into a 3% surplus, underscoring its role as the bedrock of the Israeli economy.
“The high-tech sector is the battleship of Israel’s economy,” said Professor Zvi Eckstein, head of the Aaron Institute, in the report’s foreword. “Since the October 7 war, it has proven its resilience, offsetting sharp national slowdowns. With the right policies—focused on human capital, AI readiness, and industry-academia collaboration—Israel can maintain growth of 3.5% and sustain its global leadership.”
The report positioned Israel among the world’s most innovative economies. Nearly half of the country’s high-tech employees work in research and development, and ICT specialists comprise 16.4% of the workforce. On the 2024 Global Innovation Index, Israel ranked third for innovation inputs and fourth for outputs, placing it ahead of the United States in several measures.
International demand remains strong, the report noted. Defense exports climbed to a record $14.8 billion last year, while landmark deals such as Google’s $32 billion acquisition of cybersecurity firm Wiz and Palo Alto Networks’ purchase of Israeli company CyberArk helped push mergers and acquisitions to $63.9 billion in 2025. These transactions demonstrated not only investor confidence but also Israel’s growing influence in shaping global technology markets, according to the report.
Still, the report warned that the sector faces vulnerabilities.
Israel recorded a net loss of startups in 2024 for the first time in over a decade. Ongoing military reserve mobilization has constrained research and development, and the ecosystem struggles to scale managerial and non-technical talent.
To sustain growth, the report recommended a “human-centered, AI-driven” strategy focused on broadening the workforce, accelerating the commercialization of academic research, and driving digital adoption across traditional industries.
“Israel’s edge lies in its unique ability to translate bold ideas into global solutions,” said Yariv Lotan, Vice President of Product and Data at Startup Nation Central (SNC). “Even through unprecedented challenges, the sector continues to attract capital, grow talent, and scale innovation worldwide.” SNC is a Tel Aviv-based nonprofit that promotes Israeli startups and innovation.
To sustain growth, the report recommended a “human-centered, AI-driven” strategy focused on broadening the workforce, accelerating the commercialization of academic research, and driving digital adoption across traditional industries.
“Israel’s edge lies in its unique ability to translate bold ideas into global solutions,” said Yariv Lotan, Vice President of Product and Data at Startup Nation Central (SNC). “Even through unprecedented challenges, the sector continues to attract capital, grow talent, and scale innovation worldwide.” SNC is a Tel Aviv-based non-profit that promotes Israeli startups and innovation.
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