September 16, 2019


Bottom line: April-June 2019 saw one of Israel’s largest-ever quarterly current account surpluses. This was achieved despite falls in the value of trade in both goods (smaller deficit) and services (smaller surplus), from the record levels posted in both of these in the first quarter of 2019. The key to the large surplus was the $600m surplus on primary income – highlighting the trend underway in this area in recent years, from deficit to surplus. I expect this to continue.


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 institutions, etc.) and c) individuals (German restitution payments, personal bequests, gifts etc.) less unilateral payments made by Israeli entities to foreign entities.



  • The current account surplus in April-June 2019 amounted to $4.2bn, the third-highest quarterly surplus ever, exceeded only in two quarters of 2015.
  • The deficit on trade in goods fell from a record level of $5.14bn in January-March to $4.58bn in April-June, reflecting a reduction in goods imports rather than an increase in exports.
  • The surplus on trade in services also fell – as it usually does in Q2 compared to Q1 (although not in 2018!). However, the $6.13bn surplus is a level only surpassed by that of Q1 and is much higher than any quarter in 2018.
  • It is possible that these declines reflect the general shrinkage in world trade. However, it is more likely that the strength of the shekel was a central factor. We will need to see how these trends develop in the second half of the year.
  • Primary income (see definition above) swung dramatically from a deficit of almost $500m in January-March to a surplus of almost $600m in April-June. This was key in pushing the overall surplus past $4bn.
  • This surplus on primary income was the largest in recent years and, almost certainly, the largest ever. It is part of an ongoing trend, which is likely to continue: as Israel’s stock of overseas financial assets rise, the income these assets generate will expand.
  • The surplus on secondary income rose by $173m over Q1, to $2.07bn.
  • NOTE: This set of current account data includes a revision going back to at least 2016. Most of the adjustments in the revision are minor. However, the deficit on trade in goods was revised higher for every quarter of the years 2016-2018 (except the fourth quarter of 2018). In many cases, the revision was of significant size, so that the overall surplus for every quarter from Q1 2016 through Q3 2018 was reduced; the surplus for Q4 2018 was increased.




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