Q2 current account surplus narrows; Israelis invest more abroad, while foreign inflows remain resilient

ISRAEL - In Brief 15 Sep 2025 by Sani Ziv

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Yesterday we got some surprisingly weak data from Israel’s current account. The surplus narrowed dramatically to just $0.6 billion in Q2 2025, down from $5.4 billion in Q1. This is the lowest surplus recorded since Q4 2012, signaling a worrying trend for the Israeli economy. The trade deficit widened to $8.0 billion from $6.9 billion, reflecting both a broader downtrend in exports and likely the impact of the June war. At the same time, defense-related imports rose. The services balance fell to $9.0 billion, down from $9.8 billion in Q1, as revenues from transport services, particularly aviation services, declined sharply. The shift in primary income - refers to cross-border flows of dividends, profits, interest, and wages - was striking from a $0.6 billion surplus in Q1 to a $2.6 billion deficit. This reversal stemmed mainly from the relative outperformance of Israeli equities versus global benchmarks, which led to higher dividend and profit distributions to foreign shareholders of Israeli companies.When focusing on the combined goods and services balance, which tends to have the most direct influence on the shekel, the surplus shrank to $1.0 billion in Q2, down from $2.9 billion in Q1. Preliminary July–August data point to a further widening in the trade deficit (+15% versus Q2), partly offset by signs of a modest rebound in services exports.Sharp rise in Israeli residents’ foreign investments signals capital outflow The most striking takeaway from the Q2 balance of payments data is the scale at which Israelis are shifting money abroad. Israeli residents invested $13 billion abroad during the quarter, double the average pace since the war with Iran began in late 2023...