March 14, 2016

Bottom line: Israel posted another record current account surplus for 2015. This achievement stems directly from the collapse in energy prices, which has generated a massive improvement in Israel’s terms of trade.

In the financial account of the balance of payments, Israel continues to benefit from strong inflows of FDI (foreign direct investment), while its own financial investments overseas are growing rapidly, so that its International Investment Position (IIP) is steadily strengthening.

Because the current account data is so critical, yet is widely ignored in the media and barely understood among the general public, I will first give some general background.


  • A country’s current account is the summary of all its transactions with the rest of the world over a defined period(usually a quarter or a year). It has four main components: trade in goods; trade in services; primary income; secondary income.
  • Israel’s current account has the following characteristics:
    • trade in goods: includes manufactured goods of all sorts; diamonds (raw and polished); energy products (imports only); other raw materials.
    • trade in services: includes tourism (both directions); transportation services (air and sea, passengers and cargo); and, critically, ‘other services’, which includes software and computer consultancy; scientific R&D — including proceeds from sale of start-up companies; and other consultancy services.
    • primary income: comprises income from labour — income of foreign workers in Israel less income of Israelis working abroad; and income from capital — payment of interest and dividends on Israeli investments overseas less payments on foreign investments in Israel.
    • secondary income: unilateral payments made by foreign entities to a) the Israeli government (including government-to-government aid); b) Israeli institutions (e.g. hospitals, educational estabishments, etc.) and c) individuals (German restitution payments, personal bequests, gifts etc.) less unilateral payments made by Israeli entities to foreign entities.




  • The surplus in the current account for 2015 was $13.8bn, equivalent to 4.7% of GDP — up from $11.2bn (3.7% of GDP) in 2014 and $8.5bn (2.9%) in 2013.
  • The 2015 surplus was the largest ever; the surplus in the fourth quarter was $3.57bn, slightly less than the record $3.06bn in the third quarter; the surplus for July-December 2015 was $7.174bn, the highest-ever for a half-year, exceeding that of first-half 2014 (($7.026bn).
  • The deficit on trade in goods shrank dramatically in 2015, from $7.9bn to $3.6bn (down $4.3bn, or 55%!).
  • Exports of goods and services fell in value by 6.6% compared to 2014, to $92.2bn, while imports of goods and services dropped 7%, to $83.7bn.
  • The key factor at work in this dramatic trend was the collapse of energy prices, which caused the value of energy imports to plunge by US$5.4bn., or 43%, from $12.8bn. in 2014 to $7.4bn in 2015.
  • Meanwhile, the surplus on trade in services fell by $0.8bn to $12.1bn. This fall was accounted for entirely by the decline in net receipts from tourism: incoming tourism was impacted by security issues in Israel and regionally, as well as by Russian and Ukranian economic woes, while outgoing tourism benefited from Israelis’ higher disposable income and the relative strength of the shekel.
  • Exports of ‘other business services’ — mainly software and consultancy, were stable, with software exports slightly up, but R&D exports — including start-ups — down some $0.5bn.
  • The deficit on primary income’ (see above) shrank by $0.4bn, due to lower income from securities investments.
  • The surplus on ‘secondary income’ (see above) also fell, by some $650m to $9.23bn, with the decline centred on private sector transfers.
  • The data from the financial account will be covered separately.

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