Israel's Trade Deficit Widened in 2016 as Exports Fell

Imports climbed amid surge in consumer spending and investment in capital goods.

Israel’s merchandise trade deficit widened sharply last year, although it was only slightly ahead of its 2014 level, as exports declined and imports grew, the Central Bureau of Statistics said on Thursday.

The deficit reached 50.2 billion shekels ($13.1 billion at current exchange rates), compared with 30.2 billion in 2015, although only slight larger than the 49.4 billion gap in 2014. Nevertheless, it ended a three-year decline in the deficit.

Imports, led by a surge of consumer good and capital equipment, climbed 4.8% last year to 249.8 billion shekels, the CBS said. Exports declined 4.1% to 199.6 billion shekels, with high-tech exports – the biggest category of Israeli sales abroad – taking an especially big hit.

Tech exports were down 7.1% for the year, but there were signs of a revival in the sector in the final three months of the year, when they rose at a 12.1% annual rate, the CBS said.

Israeli exports have been hurt by a strong shekel as well as a drop in output at the Intel plant in Kiryat Gat as it upgraded to the next generation of semiconductors. As a result, Israeli economic growth this year was powered by consumer spending rather than its traditional engine of exports.

But economists and the government are expecting their roles to be reversed this year. The Bank of Israel forecast consumer spending growth to slow to 4% this year from 5.9% in 2016, while exports of goods and services show a 2.9% rise, accelerating to 4.3% in 2018.