Imports fell sharply in March amid the war, but the trade deficit widened in Q1, which could eventually lead to upward pressure on the exchange rate

ISRAEL - In Brief 24 Apr 2026 by Sani Ziv
Foreign trade data for March, which was the first full month of the war, pointed to a sharp contraction in imports, which fell by 12% m/m, although they remained 2% higher y/y. The decline was broad-based: Consumer goods imports dropped by 16%, raw materials by 10%, and investment goods by 22%. In contrast, exports edged up by 2.4% m/m but were still 1.6% lower compared to a year earlier. The decline in imports likely reflects a combination of temporary weakness in economic activity during March due to the war alongside technical constraints in the import process, including delays in customs clearance.Israel’s trade deficit ($ millions)Source: Central Bureau of Statistics (CBS)Note: The 2026 estimate is based on January-March data, expressed in annualized terms. In March, Israel’s trade deficit narrowed to $3.3 billion, from $4.5 billion in February, reflecting a combination of rising exports and a contraction in imports. However, in cumulative terms, the trend remains negative: In January-March 2026, the trade deficit reached an annualized $46.7 billion, widening significantly compared to $40 billion in 2025 and $35 billion in 2024. More broadly, the trade deficit has been on an upward trend, partly reflecting the strong shekel in recent months, which has supported imports. Israel continues to run a large surplus of $40 billion in the services account, which offsets the goods trade deficit for now. However, the continued widening of the trade deficit is expected to exert upward pressure on the exchange rate going forward.

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