Israel's 2016 Current Account Fell to $12.4 Billion

Trade deficit narrowed but foreign direct investment rose.

Mixed denomination Shekel currency banknotes sit on display in this arranged photograph at Israel's central bank in Jerusalem, Israel, on Monday, Aug. 19, 2013.
Ariel Jerozolimski, Bloomberg

The surplus in Israel’s current account narrowed by 9.5% last year but it still remained quite large, equal to 3.9% of gross domestic product, the Central Bureau of Statistics reported Wednesday.

The surplus, which reflects Israel’s trade balance as well as income from investments and remittances from cross-border employment, declined to $12.4 billion in 2016 from $13.7 billion in 2015.

Israel’s trade surplus in goods and services – the single biggest factor – narrowed $7.1 billion from $9 billion, the CBS said. Exports of goods and services rose 3.2% to $894.9 billion but imports rose a faster 5.8% to $87.8 billion.

Foreign direct investment marked a second year of recovery from a 2014 slump, climbing to $12.3 billion last year from $11.5 billion in 2015 and just $6.7 billion in 2014, the CBS said.

Israel’s persistent current account surpluses and the influx of foreign investment have contributed to the strengthening of the shekel, forcing the Bank of Israel into an increasingly controversial policy of buying foreign currency to weaken it.

Omer Moav, professor of economics at Hebrew University, told Reuters Wednesday that one solution would be to remove barriers to imports such as tariffs, which would weaken the shekel by bringing in more dollars. That would help exporters as well as lower consumer prices.

“Why export more than import? Why does that make sense?” he said.