Current Account data for second quarter of 2014

Bottom line: Israel’s current account surplus on its balance of payments for the April-June 2014 quarter was $2.2bn — a reversion to ‘normal’ levels, after the record-breaking $3.5bn originally announced for January-March (and now revised up to $3.6bn!). As noted here in June, “the factors responsible for [the Q1] outcome are unlikely to be repeated, at least in the same degree, and the surplus will shrink in the current and subsequent quarters”. 

  • The Q2 surplus of $2.2bn is in line with the average level of the previous four quarters.
  • The two key components of the current account that were responsible for the Q1 mega-surplus reverted to their normal levels in Q2. Thus the deficit in trade in goods was $2.2bn in Q2, similar to its levels in the second, third and fourth quarters of 2013 — after falling to $1.05bn in Q1 2014.
  • Similarly, the deficit on ‘primary income’ — the balances of flows paid to expatriate labour (wages) and to investors (dividends and interest) — was $1.4bn in the latest quarter, compared to only $0.7bn in the previous one and compared to an average of $1.55bn in 2013.
  • The surplus on trade in services, which fell to $2.85bn in Q1, recovered to $3.1bn in Q2. This surplus is the key driving force in the evolution of Israel’s current account surplus over the last 15 years.
  • In the financial account, Israeli direct investment overseas doubled from the Q1 level of $1.1bn to $2.13bn, but was still well below foreign FDI in Israel, which totaled over $2.8bn, as in Q1.
  • Foreign portfolio investment in Israel, always a volatile item, slumped from over $3bn in Q1 to only $467mn in Q2.
  • Israel’s foreign exchange reserves rose by only $1.12bn in Q2, after jumping $3.6bn in Q1, as the Bank Of Israel scaled back its intervention in the FX market.
Graph:  Quarterly deficit in trade in goods Q1/2011 – Q1/2014, ($ Million)
Graph: Quarterly deficit in trade in goods Q1/2011 – Q1/2014, ($ Million)

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