Expanding defense exports reduces the trade deficit

ISRAEL - In Brief 10 Aug 2023 by Jonathan Katz
Industrial exports continue to expand, especially defense exports. Although “defense” is not an export category, we can see the increase in exports of “transport equipment”, “metal products” and “electronic and optical products”, mostly associated with military equipment. Total industrial exports are up 12.4% saar (trend data) in May-July following an increase of 5.3%. Meanwhile, imports are slightly down, both consumer goods and raw materials (in dollar terms). As a result of export growth and import contraction, the trade deficit has declined by 6bn USD in January-July compared to this time last year. This improvement in the trade account will offset the weaker high-tech service exports and keep Israel’s CA surplus strong, we estimate at 4.5% GDP this year following 4.2% last year. This is a positive factor for the shekel, once the political uncertainty declines.

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