Forty-four percent of Israel's venture capital community expects the economic decline to persist in coming half-year, a survey found.

Israeli venture capital fund managers are increasingly pessimistic about the economic outlook for the next six months, consultants Deloitte & Touche - Brightman Almagor said on Tuesday.

Results of a quarterly survey conducted by the local office of Deloitte & Touche showed that 44% of the venture capital community in Israel expect the overall economic climate to decline over the next six months, compared with 27% in the previous quarter. "The ongoing local economic and political situation that has resulted in a feeling that there is a lack of leadership and strategic planning has caused an increasingly pessimistic outlook," the survey said.

Israel's economy is mired in a recession, triggered by the global technology slump as well as a nearly two-year-old Palestinian uprising that has crushed the tourism and construction sectors.

Deloitte & Touche said confidence also fell in California's Silicon Valley, where 23% of the venture capital community expects the overall economic climate to decline.

According to the survey in Israel, 70% of the respondents expect the difficulty in raising new funds by companies from venture capital firms to remain the same and 27 percent expect it to be even harder.

"Biotech, security and medical devices remain the 'favored' sectors for investments," the survey said.

Israeli venture capital funds, like their counterparts around the world, are also experiencing difficulties in raising new funds. Deloitte & Touche said all the community members expect this difficulty to remain the same in the next few months.

Israeli high-tech firms raised $291 million from local and foreign investors in the second quarter, down 23% from the first quarter, according to the Israel Venture Capital Research Centre.

Exit routes continue to remain mostly closed for portfolio companies. "The IPO (initial public offering) market is almost non-existent and company valuations are low," the survey said.