Israel’s Current Account Plummets in September 2025: A Data-Driven Macro Analysis
Israel’s current account surplus collapsed to 0.57 billion ILS in September 2025, sharply below the 4.20 billion estimate and prior 5.42 billion reading. This marks the lowest surplus in two years, signaling rising external vulnerabilities amid geopolitical tensions and tighter global financial conditions. Monetary policy remains cautious as inflation moderates, while fiscal space tightens. Forward risks include export headwinds and regional instability, balanced by resilient tech exports and government stimulus. Market reactions were swift, with the ILS weakening and bond yields rising.
Table of Contents
The latest Current Account data for Israel (IL), released on September 14, 2025, reveals a dramatic contraction to 0.57 billion ILS. This figure is well below the consensus estimate of 4.20 billion ILS and the previous quarter’s 5.42 billion ILS surplus, according to the Sigmanomics database. The current account surplus has historically fluctuated between 4 and 10.50 billion ILS over the past two years, making this the lowest reading since at least September 2023.
Drivers this month
- Exports slowed sharply amid global demand softness and supply chain disruptions.
- Imports rose due to higher energy prices and increased capital goods purchases.
- Services balance weakened, reflecting reduced tourism and business travel.
Policy pulse
The Bank of Israel has maintained a cautious stance, keeping interest rates steady at 3.75%, balancing inflation control with growth concerns. The current account deterioration adds pressure to monitor external financing needs closely.
Market lens
Immediate reaction: The ILS depreciated 0.60% against the USD within the first hour post-release, while 2-year government bond yields rose by 12 basis points, reflecting increased risk premia.
Israel’s current account surplus averaged 5.70 billion ILS over the last 12 months, with peaks at 10.50 billion ILS in March 2024 and troughs near 2.98 billion ILS in March 2025. The September 2025 print of 0.57 billion ILS represents a sharp deviation from this trend, signaling a potential structural shift or transient shock.
Core macroeconomic indicators
- GDP growth slowed to 2.10% YoY in Q2 2025, down from 3.40% in Q4 2024.
- Inflation moderated to 2.80% YoY in August 2025, within the central bank’s target range.
- Unemployment remained stable at 3.70%, reflecting labor market resilience.
Monetary policy & financial conditions
The Bank of Israel’s neutral monetary stance aims to support growth amid external headwinds. Financial conditions tightened globally, with rising US Treasury yields and cautious risk sentiment impacting capital flows into Israel.
Fiscal policy & government budget
Fiscal deficits widened slightly to 3.80% of GDP in H1 2025, driven by increased defense spending and social transfers. The government’s commitment to infrastructure investment may partially offset external pressures on the current account.
What This Chart Tells Us
Market lens
Immediate reaction: The ILS/USD exchange rate weakened by 0.60%, while 2-year government bond yields climbed 12 basis points, reflecting increased risk aversion and concerns over external financing.
Looking ahead, Israel’s current account trajectory hinges on several key factors, including global demand, geopolitical stability, and domestic policy responses. We outline three scenarios:
Bullish scenario (25% probability)
- Global demand rebounds, boosting exports by 8% YoY.
- Energy prices stabilize, reducing import costs.
- Fiscal stimulus and monetary accommodation support growth.
- Current account surplus recovers to 4–5 billion ILS by Q1 2026.
Base scenario (50% probability)
- Moderate export growth of 3% YoY amid uneven global recovery.
- Import costs remain elevated due to persistent energy prices.
- Fiscal deficits remain manageable; monetary policy steady.
- Current account stabilizes near 1–2 billion ILS surplus through 2026.
Bearish scenario (25% probability)
- Geopolitical tensions escalate, disrupting trade and investment.
- Global recession pressures exports, causing contraction.
- Capital outflows intensify, pressuring the ILS and reserves.
- Current account deficit emerges by mid-2026, risking external imbalances.
Structural & long-run trends
Israel’s economy is increasingly reliant on high-tech exports and services, which tend to be less sensitive to commodity cycles but vulnerable to global tech demand swings. The current account’s volatility underscores the need for diversification and enhanced resilience to external shocks.
The September 2025 current account print is a clear warning signal for Israel’s external sector. While short-term shocks explain part of the decline, persistent global uncertainties and regional risks may prolong pressures. Policymakers must balance growth support with external stability, leveraging fiscal tools and monetary prudence.
Financial markets have already priced in some risks, as seen in the ILS depreciation and rising bond yields. Investors should monitor upcoming trade data, geopolitical developments, and central bank communications closely.
Overall, Israel’s external position remains manageable but fragile. Strategic diversification and prudent macroeconomic management will be critical to navigate the evolving landscape.
Key Markets Likely to React to Current Account
The current account balance directly influences Israel’s currency, bond yields, and equity markets. Key tradable symbols historically correlated with this indicator include the USDIILS forex pair, reflecting currency pressure; the TA35 stock index, sensitive to export sector performance; the ILGOV2Y government bond, tracking yield changes; the BTCUSD crypto pair, often a risk sentiment barometer; and the EURILS pair, reflecting regional trade and capital flows.
Indicator vs. USDIILS since 2020
Since 2020, Israel’s current account surplus and the USDIILS exchange rate have shown an inverse correlation. Periods of rising surpluses coincide with ILS appreciation, while deficits or sharp drops in the surplus align with ILS depreciation. This relationship highlights the current account’s critical role in currency valuation and external stability.
FAQs
- What is the significance of Israel’s current account data?
- The current account reflects Israel’s trade balance and external financial flows, impacting currency strength and macroeconomic stability.
- How does the current account affect monetary policy in Israel?
- A deteriorating current account may pressure the central bank to tighten policy to defend the currency or loosen to support growth, depending on inflation and growth dynamics.
- What are the risks to Israel’s current account outlook?
- Risks include global demand shocks, rising import costs, geopolitical tensions, and capital flow volatility.
Key takeaway: Israel’s current account plunge in September 2025 signals rising external risks, demanding vigilant policy and market monitoring.
This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.
The current account surplus of 0.57 billion ILS in September 2025 is a stark decline from 5.42 billion ILS in June 2025 and well below the 12-month average of 5.70 billion ILS. This represents an 89.50% drop quarter-on-quarter, the steepest since the 2024 Q1 dip to 2.98 billion ILS.
Historical data from the Sigmanomics database shows that such a sharp contraction is rare, with previous lows occurring during global shocks such as the COVID-19 pandemic and regional geopolitical tensions in late 2023.