Israel enjoys record balance of payments surplus

Yoel Naveh

The balance of payments surplus was NIS 3.8 billion in the third quarter, reported Ministry of Finance chief economist Yoel Naveh.

Plunging oil and coal prices pushed Israel's balance of payments surplus up to an all-time record NIS 3.8 billion in the third quarter, according to a review published today by Ministry of Finance chief economist Yoel Naveh. The large surplus is generating pressure in the direction of appreciation of the shekel, thereby countering the effect of the Bank of Israel's monetary policy of retaining a negligible interest rate, despite the recent interest rate hike by the US Federal Reserve.

Inflation expectations in Israel are still falling while the US Federal Reserve is raising its interest rate, according to figures published today by the Bank of Israel. The figures, based on forecasts by leading analysts, show expectations of a 0.5% rise in the Consumer Price Index over the next 12 months, compared with last month's 0.7% projection.

The drop in inflation expectations is consistent with the Consumer Price Index, which fell 0.4% in November, thereby putting the inflation rate for the past 12 months at -1%.

Naveh announced that the 5.1% ratio of balance of payments to GDP in the third quarter was the highest since the first quarter of 2010. He attributed the surplus to exports of goods and a drop in imports. The surplus of exports over imports reached NIS 2.5 billion in the third quarter, a historically high level.

The principal cause of the fall in imports is the drop in the prices of the energy inputs imported by Israel. Both oil and refined oil products and coal prices have fallen to historically low levels. In addition, the growing use of Israeli-produced natural gas is replacing the use of imported coal and oil for producing electricity.

Naveh noted that the services account balance had worsened, following weak exports of services. Particularly prominent was a 7.4% plunge in exports of business services, indicating weakness in R&D and high tech - two sectors considered the strong points of the Israeli economy. Naveh added that the tourism had not yet recovered from the crisis caused by Operation Protective Edge last summer. Another reasons beside the wave of terrorist attacks was the weakness of the ruble and the euro, which is having a negative impact on tourism to Israel from Russia and the EU.

Published by Globes [online], Israel business news - www.globes-online.com - on December 20, 2015

© Copyright of Globes Publisher Itonut (1983) Ltd. 2015

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