developments and trends in israeli exports · exports of aerospace industry, a highly concentrated...
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Developments and Trends In Israeli Exports
Full Year 2018 | summary report
Written by the Economic Unit | Israel Export Institute
March 2019
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Contents
Summary of 2018 in Exports | Findings ............................................................ 3
Trends in Israeli exports | Exports of goods and services ..................................... 5
Exports of Goods | by Sectors ............................................................................... 7
Exports of other industries |................................................................................. 10
Exports by Geographic Regions | ........................................................................ 11
Asia ...................................................................................................................... 12
European Union .................................................................................................. 12
United States ....................................................................................................... 13
Latin America ...................................................................................................... 13
Sub-Sahara Africa ............................................................................................... 13
Developments and Changes in Israel's Main Export Destinations | .................... 16
Trends in exports to top destinations .................................................................. 18
United States ....................................................................................................... 23
China ................................................................................................................... 24
Britain.................................................................................................................. 27
The Netherlands .................................................................................................. 29
Turkey .................................................................................................................. 30
Germany .............................................................................................................. 32
France ................................................................................................................. 33
India .................................................................................................................... 33
Brazil ................................................................................................................... 35
Japan ................................................................................................................... 36
Exports of Services | ............................................................................................ 41
Hi-Tech Exports | analysis by industry and services ........................................... 46
Forecast for 2019 | ............................................................................................... 48
3
Developments and Trends in Israeli Exports
Summary of 2018 in Exports | Findings
7% increase in exports of goods and services in 2018; amounted to USD 111 billion;
➢ Exports of goods and services rose by 7% in dollar terms, to USD 110.6 billion. The
increase in exports was mainly attributable to accelerated growth in services
exports in general, and high-tech services in particular – in line with the trend of the
last few years.
➢ Exports of Hi-Tech services fueled the overall export growth in services – hitting a
record USD 50 billion in 2018 its weight in total Israeli exports reached an all-time-
high (45% of total exports).
➢ The bulk of Hi-Tech exports are attributed to services: approx. USD 29 billion that
represent 57% of total Hi-Tech exports. Exports of industrial Hi-Tech (equipment and
products) totaled USD 22 billion – 43% of total Hi-Tech exports.
➢ Exports of goods has grown for the second consecutive year rising 3% to USD 60.6
billion, following a continued decline in previous years. Growth was recorded almost
across the board: while electronic components and chemicals recorded the highest
growth rate, exports of pharmaceuticals and aircraft fell sharply.
➢ As we predicted in our previous export reviews - in 2018 there was a substantial
recovery in exports of electronic components, having a positive impact on exports
to Asia, which also soared compared to 2017 levels.
➢ Exports to Asia recorded a sharp increase; exports to the European Union and the
United Stated fell slightly - mainly due to the decline in pharmaceutical exports.
➢ The forecast for 2019: a 5% increase in dollar terms to exports of USD 116 billion;
should global trade and export projections materialize, Israeli exports are predicted
to hit USD 120 billion by 2020.
4
Trends in Israeli exports | Exports of goods and services
Exports continue its accelerated growth. After increasing 8% in dollar terms to USD 103 billion in
2017, Israeli exports continued its rapid growth rate. During 2018 exports of goods and services
rose by a further 7% in dollar terms, hitting an impressive USD 111 billion.
The upward trend in Israeli exports over the last few years show is primarily attributable to the
accelerated growth in exports of the services sector, which rose by 12% in dollar terms to a record
level of USD 50 billion. This positive trend is fuelled by the sharp and continued growth in Hi-Tech
services, alongside a handsome recovery in exports of tourism and transportation services.
0
10
20
30
40
50
60
70B$
Data analysis: Economic Unit, IEICI
A sharp growth in services exports; Gradual recovery in goods
Israeli exports of goods and services(USD, billion) | 1980 - 2018
Services Goods
5
Export of goods also contributed to the overall upward trend with a 3% increase to a total of USD
60.6 billion in 2018. The growth in the exports of goods was witnessed by most industrial sectors,
with an emphasis on electronic components and chemicals. This was somewhat offset by
pharmaceutical and aircraft exports, which recorded sharp double-digit decreases from their levels
in 2017.
In line with the sharp increase
in Israel's services exports
over the last few years, its
weight in total exports rose to
the highest rate ever recorded
and as of year-end 2018
accounts for 45% of total
exports. At the same time, the
weight of goods exports fell to
55% only.
Exports of goods to Asia
recorded an impressive
recovery. Total exports to the
Asian continent in 2018 grew
by 21% to USD 10 billion. The
growth is mainly attributable
to the sharp increase in
exports of electronic
components. The steep
decline in pharmaceutical
exports during 2018 had a
negative impact on exports to
Israel's two leading trade partners: exports to the United States fell by 3% to a total of USD 11
billion, while exports to the European Union fell by 3% to a total of USD 15.5 billion.
0%
10%
20%
30%
40%
50%
60%
70%
80%
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12
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16
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Data analysis: Economic Unit, IEICI
Over the last decade:
A sharp and continued increase in the weight of the services sector
Israeli exports of goods and services(USD, billion) | 1980 - 2018
Goods Services
6
Exports of Goods | by Sectors (excluding exports to the Palestinian Authority and trade adjustments)
➢ Exports of goods (excl. adjustments and exports to the Palestinian Authority)
amounted to USD 54.3 billion in 2018, up 2.2% in dollar terms compared to 2017.
➢ Exports of goods excluding diamonds amounted to USD 47.5 billion, up 2.5% from
2017.
➢ Industrial exports, which accounts for 86% of total goods exports, rose 2.7% from
2017, to USD 46.3 billion.
➢ Exports of diamonds in 2018 totaled USD 6.8 billion, virtually unchanged from export
volumes in 2017 (12% of total goods exports).
➢ Agricultural exports fell 6.5% to USD 1.1 billion (2% of total goods exports)
45.2 43.6 45.1 46.3
7.2 7.4 6.7 6.81.2 1.2 1.2 1.1
-
10
20
30
40
50
60
2015 2016 2017 2018
B$
Data analysis: Economic Unit, IEICI
Breakdown of Goods exports by sectors | 2015-2018billions of USD
Industrial export Diamonds export Agricultural export
7
An analysis of export trends in the industrial sector points to the significant impact of
pharmaceuticals, electronic components, chemicals and aircraft ("the dominant export
industries") on total exports – these industries were characterized by high volatility during 2018.
For example, pharmaceutical exports which grew by 9% in 2017 (to a record volume of USD 7.5
billion), fell sharply in 2018 by more than 22% to USD 5.9 billion – the lowest export volume in the
last decade. Exports of electronic components, which fell by 19% in 2017 (mainly as a result of
upgrading the production lines in Intel's plants) soared 20% in 2018 to USD 3.9 billion1. Exports of
chemicals which rose by 13% in 2017, recorded an impressive 15% growth in 2018 to USD 8.9
billion.
Data analysis: Economic Unit, IEICI
1 With regard to exports of electronic components it is noted that in line with the nature of production activities in the
sector, sometimes the valuation of exports as part of the calculation of foreign trade data differs from the value of export revenues recorded in the balance-of-payments current account – this was the case in 2015 when foreign trade data included an exceptionally high value of component exports. Accordingly, in 2018 component export revenues based on foreign trade data may be higher than the export revenues recorded in the balance-of-payments.
1.5
4.1
3.3 3.4 3.
8
4.8
4.6
6.2
4.0
3.2
3.9
Electronic component exports:back to growth
(billions of USD)
5.0
4.7
6.6
7.3
6.8
6.3 6
.5 6.8 6.9
7.5
5.9
Pharmaceutical exports:the lowest volume over the last 10 years
(billions of USD)
8
Exports of aerospace industry, a highly concentrated and dominant industry, which is subject to
volatility due to the nature of transactions and sales contracts signed by aircraft manufacturers, fell
sharply by 27% in 2018 to USD 2.35 billion, after soaring 18% in 2017 (to a record USD 3.2 billion).
In line with the registered order backlog and Company's reports, we predict that during 2019,
aerospace industry exports will pick up again.
Total exports by these dominant industries which, as stated, are extremely volatile and
concentrated fell by a cumulative 3.5% compared to 2017, to USD 21 billion – 44% of total exports
(compared with 47% in 2017)2.
Exports growth rate | quarterly by dominant industries and other industries rates of changes year-over-year
Data analysis: Economic Unit, IEICI
2 Goods excluding diamonds
-7.3%
0.9%
-6.5%
-2.5%
-0.6%
-3.5%
3.9%5.6%
-0.5%
4.8%8.3%
2.1% 1.2%
-1.7%
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
Export of Goods
Chemicals, Pharmaceuticals, Aircrafts & Electronic components (=G4)
Export of Goods - Exc. G4
9
Exports of other industries
Exports of other industries saw a clear upward trend, with a growth rate recorded almost across the
board. Aggregate exports by these industries – accounting for 56% of total exports – rose by 8% in
2018 to a total of USD 26.5 billion.
An increase was recorded by the following key industries: exports of machinery and equipment
(which includes printing, robotics, irrigation and food machineries) rose by 7% from 2017 to USD
6.3 billion, exports of rubber and plastic equipment and products rose by 5% to USD 2.3 billion,
exports of oil refineries soared 65% to USD 1.4 billion, exports of food and beverages increased by
11% to USD 1.2 billion and exports of electric equipment (which includes equipment and systems
in the fields of alternative energy, electricity and electronics) totalled USD 1.1 billion, unchanged
from 2017. Additional salient increases were recorded by exports of textile and apparel (rose 3%
to USD 870 million), exports of metals (rose 10% to USD 690 million) and exports of wood, paper
and printing products (rose 3% to USD 480 million).
Exports of industrial sectors| 2018 versus 2017 In billions of USD
Data analysis: Economic Unit, IEICI
7.87.2
5.9
7.5
3.2 3.2
2.2
1.5
0.8 1.0 1.10.8 0.6 0.6 0.5
8.9
7.9
6.35.9
3.9
2.4 2.3
1.61.4 1.2 1.2
0.9 0.7 0.5 0.5
2017 2018
10
Exports by Geographic Regions |
(Goods excl. diamonds and excl. exports to the Palestinian Authority and trade adjustments)
An analysis of export trends by trading regions points to recovery and growth in the volume of
goods exported from Israel to Asia and Latin America. In contrast, exports to the US and EU
countries recorded a slight decrease from 2017 levels, while export to Africa Sub-Saharan countries
continues to decline, in line with the global trend.
Bear in mind that the development of exports by geographic regions is tightly linked to industry-
level developments. For example, the positive trend recorded in 2018 in the exports of chemicals
and electronic components fuelled the growth in exports to high-demand regions, especially to Asia
and Latin American. At the same time, the sharp decline in pharmaceutical exports from Israel
pulled down exports to the US and EU countries.
Asia
As we anticipated in the IEI's summary of trends' report for 20173, during 2018 exports to Asia
witnessed an impressive recovery, soaring 21% to a total of USD 10.3 billion. The electronic
components industry had a material impact on exports, in line with the overall trend of exports to
Asia over the past few years. Components exports play a significant role in exports to the region
and accounts for 25% of total goods exports.
The substantial change in exports to China - traditionally Israel's largest export destination in Asia
and as of 2018, the second biggest market for Israeli commodity exports - had the biggest impact
on exports to Asia. In 2018, exports to China rallied 50% to a record level of USD 4.7 billion.
Additional increases were recorded by exports to India (up 23% to USD 1.2 billion), exports to Japan
(up 31% to about one billion dollars) and exports to South Korea (up 9% to about one billion
dollars).
3 "The projected growth in exports of electronic components in 2018 will support an overall recovery in exports to
Asia" – Developments and Trends in Israeli Exports – Summary Report for 2017 – the Economic Unit, IEI
11
The European Union4
Exports to the European Union in 2018 fell by 3% in dollar terms compared to 2017. Bear in mind
that in 2017 exports to EU countries rose by a cumulative rate of 20% to USD 16 billion. The sharp
decline in exports of pharmaceuticals, a dominant export industry which accounts for 25% of total
goods exported to the EU, naturally affected exports to this region. Another sector that experienced
a steep decline in exports was the aerospace industry. These negative effects were offset by the
sharp increase in exports of chemicals, telecom, medical equipment and agricultural produce.
Exports to major designations in the EU included Britain – Israel's biggest export market in Europe
– which fell by 17% during 2018, mostly due to waning pharmaceutical exports. Additional declines
were recorded in exports to The Netherlands (-1%), France (-15%) and Belgium (-15%). On the
other hand, handsome increases were recorded in exports to Germany (+9%), Italy (+7%), Spain
(+6%) and Cyprus (+86%), mainly owing to the sharp growth in exports of chemicals and oil
refineries to these countries.
The United States5
Exports to the US in 2018 amounted to USD 11 billion, slightly below export levels in 2017. This
decline is attributable to the sharp and continued contraction in pharmaceutical exports, which was
offset by a substantial rise in chemical exports. It is noted that these data relate to exports of goods
only (excluding diamonds) – but if the calculation included services, the US' share of Israeli exports
would increase considerably.
Latin America
Exports to Latin American countries in 2018 amounted to USD 2.2 billion, up 12% from export
levels in 2017. The growth in exports was mainly due to the boost in exports to Brazil (up 28% to
USD 1.2 billion), which was fuelled by the rise in exports of chemicals and minerals to the country.
4 For a detailed analysis on exports to EU countries and exports trend for the last few years see the Economic Unit's
page on the IEI's website. 5 A detailed analysis on exports to the US is presented below under "Export Trends to Leading Destinations".
12
Sub-Sahara Africa
Exports to Sub-Sahara African countries fell by 5% in 2018 to USD 725 million. The contraction in
exports is mainly attributable to a sharp decrease in exports to South Africa, which was somewhat
offset by the double-digit increase in exports to Nigeria, mainly owing to the growth in exports of
chemicals and oil refineries.
Exports by Regions| 2018 versus 2017 In billions of USD
Data analysis: Economic Unit, IEICI
15.9
11.2
8.5
4.0
2.81.9
0.81.3
15.5
10.910.3
3.5 3.22.2
0.71.4
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2
4
6
8
10
12
14
16
18
B$
2017 2018
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Data analysis: Economic Unit, IEICI
Data analysis: Economic Unit, IEICI
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Developments and Changes in Israel's Main Export Destinations |
Exports to key countries by industries (Exports of goods excl. diamonds)
Exports to Israel's 10 leading destinations in 2018 accounted for 63.5% of total exports, as
compared to 62% in the same period of 2017. Exports to three destinations (the US, Britain and
France) fell in 2018 while 6 of the 10 biggest markets recorded a growth in exports compared to
2017 – with a double-digit growth to 5 destinations (China, Turkey, India, Brazil and Japan). Of the
20 biggest destinations – which account for 79% of total exports (compared to 77.5% in 2017), there
was a decline in exports to 7 destinations (compared to 4 only in 2017), 5 of which saw a double-
digit decline of more than 15%. 11 out of the 20 destination saw a double-digit increase, 7 of which
saw a double-digit growth of more than 20%.
The changes and fluctuations recorded in the major export industries in 2018 painted the picture
of Israeli exports. For example, exports of pharmaceuticals had a negative impact on overall exports
to the US and European countries. On the other hand, the increase in exports of electronic
components contributed to the sharp growth in exports to various destinations in Asia – the same
applies to chemical exports, which largely contributed to the sharp growth in exports to Turkey and
additional Mediterranean countries – where chemicals constitute a significant component of
imports.
Data analysis: Economic Unit, IEICI
15
Israel's Top Export Destinations | 2018 Exports of goods excluding diamonds, original data, change in % y-o-y, in billions of USD
Rating in
2018 Country
2018 Exports
($B) % change 2017 rating
Change in
rating
1 USA 10.9 -3% 1 (-)
2 China 4.7 47% 3 +1
3 Britain 4.0 -17% 2 -1
4 Netherlands 2.3 0% 4 (-)
5 Turkey 1.9 34% 7 +2
6 Germany 1.8 9% 6 (-)
7 France 1.4 -15% 5 -2
8 India 1.16 23% 8 (-)
9 Brazil 1.16 28% 9 (-)
10 Japan 1.00 31% 15 +5
11 S. Korea 0.97 9% 11 (-)
12 Italy 0.94 7% 12 (-)
13 Spain 0.86 6% 13 (-)
14 Belgium 0.76 -15% 10 -4
15 Cyprus 0.75 86% 20 +5
Data analysis: Economic Unit, IEICI
U.S 23.0%
China 9.8%
U.K 8.4%
Netherlands 4.8%
Turkey 4.0%
Germany 3.7%
France 2.9%
India 2.4%
Brazil 2.4%
Japan 2.1%
S. Korea 2.0% Italy
2.0%
Spain 1.8% Belgium
1.6%
Cyprus 1.6%
R.O.W 27.5%
16
Trends in exports to top destinations The US is Israel's biggest and most important export market. Over the last few years, average
exports (goods only, excluding diamonds and services) amounted to USD 11.3 billion annually –
which is equal to aggregate exports to the UK, China, the Netherlands and Turkey (the four leading
export destinations, after the US).
A long-term analysis of exports
to the US in the last two decades
points to two major trends:
during the first decade, between
the dot.com crisis to the global
credit crunch, there was a sharp
increase in exports to the US,
mainly between 2002 and 2008.
During these years, exports grew
by a cumulative 100% and posted
an annual average 12% growth.
Over the last decade, however, from 2008, the year of the global financial crisis and until now,
exports to the US have been stagnant. In fact, during the last 10 years, exports remained on an
average level of USD 11.2 billion.
From 2008 until 2018, exports
declined by a cumulative 6% and
by 0.6% annually – despite a 14%
increase in commodity exports.
As a result of the downward
trend, the weight of the US in
total exports has gradually
declined. Despite the rapid
growth in exports to the US in the
period 2002-2008, its weight in
total exports remained
unchanged at 29% on average.
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Export to U.S | In billion of USDGoods, exc. diamonds (b$)
0%
5%
10%
15%
20%
25%
30%
35%
Export to U.S | % Share of ExportGoods, exc. diamonds (b$)
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In the last 10 years, there was a clear decline in the US’ share of Israeli exports which, at year-
end 2018, was 23% only. The analysis of exports by components and over time provides an
explanation to the negative changes and developments in exports to the US over the last decade
– which were substantially affected by the high volatility of the exports of key industries:
electronic components, chemicals and most of all – pharmaceuticals. Their impact and centrality
in overall exports is naturally reflected (not only but especially) in exports to a major market like
the US - and explains the changes in exports during the reported period. The sharp increase in
exports to the US in the first decade was driven by accelerated exports of pharmaceuticals and
electronic components. The rapid growth in demand and in commodity prices also contributed to
the rapid growth in revenues from overseas sales of chemicals and minerals.
Accordingly, the developments and
fluctuations in exports of the
dominant industries during the last
decade (2008-2018), had a
substantial impact on exports to the
country. The continued decline in
pharmaceuticals export shipments
to the US had a material and crucial
impact (as shown by this graphs).
In the period 2008-2018
pharmaceutical exports to the US
was sliced by 50% from USD 3.8
billion in 2008 to USD 1.9 billion only
in 2018. This contraction explains
the downward trend in exports to
the US over the past decade: net of
pharmaceuticals the picture is
reversed and sales to the US have in
fact increased. During the reported period, exports to the US grew by a cumulative 18% from USD
7.8 billion in 2008 to USD 9.2 billion in 2018.
3.8 3.
5
4.5
4.1
3.4
3.0
2.8 3.2 3.
3
2.5
1.9
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4
6
8
10
12
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2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Export of pharmaceuticals
Export to U.S - Exc. Pharmaceuticals
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An overview of export trends in the last few years points to 3 features in the breakdown of Israeli
exports by top export destinations: a continued decline in exports to the US, a sharp increase in
exports to Asia (which has been highly volatile in recent years) and stability in exports to EU
countries6.
6 Bear in mind that these are exports of goods only (excl. diamonds). If we include services in the calculation, the US
has a much larger weight in Israeli exports.
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2
4
6
8
10
12
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
B$
Data analysis: Economic Unit, IEICI
Export to U.S by Sectors | 2008-2018in Billions of USD
Pharmaceuticals Chemicals & Oil refineries Electronic components
Machinery equipment Medical equipment Rubber & Plastic products
Telecommunication equipment Metals Electronic & optical equipment
Computer & Printing equipment Electric Machinery Textiles
Other
19
Based on the average data of the last few years7, the US' weight in exports fell to 24% (from 31% in
2002). The weight of Asia has increased to an average 21% of exports (compared to 14% in that
year) whereas the weight of EU countries remained high and stable at an average 23% of total
exports.
Geographic Regions' Share of Israeli Exports | Goods, excluding diamonds
Data analysis: Economic Unit, IEICI
Exports to China, which grew at an accelerated rate during the last 10 years, is the main
contributory factor to the rising weight of Asia in total exports – in 2018 this trend was supported
by a sharp double-digit growth in exports to other countries in Asia, such as India (+23%), Japan
(+31%) and South Korea (+9%).
There is no doubt that the expansion in exports to China this year is exceptional and attributable to
exports of electronic components; however the growth in exports to China has been recorded by
7 Annual average for the period 2015-2018
32.5%32.2%
23.0%
30.8%
21.6%
14.2%
USA European Union Asia
20
all export sectors, and that its share and significance in Israeli exports has been rising steadily
from one year to the next. In 2018, China was the second biggest destination for Israeli exports
worldwide.
The decline in US' share in overall exports and the rise in the weight of other markets point to the
trend of the last few years: exports are more geographically decentralized. The calculation of
exports to different destinations as a percentage of total exports to the US is clearly indicative of
this trend: exports to China, for example, which accounted for 8.7% only of exports to the US in
2007, grew steadily over the years and as of year-end 2018 accounted for 43%. Exports to the UK,
which accounted for 16.3% of Israeli exports to the US in 2007, grew dramatically to 37% in 2018.
So did exports to the Netherlands and Turkey, which current represent 21% and 17% of exports to
the US, respectively, compared to 16% and 12% a decade ago.
Keep in mind that while exports are more decentralized geographically – they remain highly
centralized from an industrial point of view.
Data analysis: Economic Unit, IEICI
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
201820172016201520142013201220112010200920082007
Export to leadind destinations compare to the US % Share of export to US (US=100%), 2007-2018
China U.K Netherlands Turkey Germany
France Japan India Italy
21
Developments in Israel's Top Export Destinations
United States8
In 2018 exports to the US totalled USD 10.9 billion – down 3% from 2017. We should re-emphasize
the crucial role of pharmaceuticals in the changes and fluctuations in Israeli exports to the US.
Exports of pharmaceuticals, which accounts for 25% of total goods exported to the US9, fell sharply
by 25% from USD 2.5 billion to USD 1.9 billion in 2018. Pharmaceuticals represent a dominant and
concentrated industrial export to the US (and overall in Israeli exports), and are also highly volatile.
These exports are considerably affected by Teva's production and export activities. We expect this
downward trend to continue in 2019, with negative implications on Israeli exports to the US.
As stated, excluding pharmaceuticals exports to the US have increased, indicative of the overall
trend in the exports of major industries. Export of chemicals rose sharply by 22% to USD 1.3 billion
and exports of machinery and equipment increased by 10% to USD 940 million. Exports of medical
equipment to the US have increased for the third consecutive year. In 2018 exports of medical
equipment rose by 2% from 2017 and by 37% since 2015, from USD 560 million in 2015 to USD 770
million in 2018.
Additional industries that recorded an increase in
exports were rubber and plastic (rose by 11% to
USD 670 million), telecom equipment (rose by 4%
to USD 605 million), metal products (increased by
3% to USD 555 million) electronic and optical
equipment10 (increased by 12% to USD 510
million), computer and printing systems (rose by
7% to USD 445 million) and food and beverages,
which grew by 25% to USD 315 million.
In contrast to the general positive trend, exports
of electronic components fell by 20% to USD 860
million.
8 For details on export trends to the US, see above. 9 Goods, excluding diamonds, based on the average data in the period 2015-2018 10 Among others, includes advances equipment for measurement and control of production processes – mainly for
the electronics industry.
538 564
534 564 559
691
755 767
2011 2012 2013 2014 2015 2016 2017 2018
Exports of medical equipment to the US
2011-2018 (M$)
22
China
In 2017, exports to China remained unchanged, despite the contraction in exports of electronic
components and the general downward trend in exports to Asian markets. In 2018, the growth in
exports of electronic components was unusually high - and was the main contributory factor to
the sharp increase in exports to China compared to 2017, up about 50% to a record USD 4.7
billion. In comparison, exports to China in the whole of 2017 totalled USD 3.2 billion. An increase
was also recorded by other major export industries, for the second consecutive year since 2017.
In line with the strong favourable trend, China's share of total exports to Asia continued to grow
and at year-end 2018 hit a record 46% of total goods exported to Asia (compared to 37.5% in 2017,
32% in 2016 and 27.5% in 2015). As the data shows, China's weight over the last 10 years rose
sharply compared to India's share of exports to Asia, which is gradually decreasing.
It is noted that exports to China as a percentage of total exports is consistent with its rising weight
in regional exports: from 2.4% in 2007 to 7% in 2017 and a record weight of 11.3% in mid-2018.
Countries' Share of Exports to Asia | 2007-2018
Data analysis: Economic Unit, IEICI
16.3%
45.7%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
China
India
Japan
S. Korea
Hong Kong
23
As stated, the sharp growth in the exports of electronic components had a significant impact on
total exports to China in 2018. During the reported period, exports of electronic components soared
by 80% to USD 2.6 billion – which is an unusually high figure11. Electronic components are Israel's
main industrial exports to China and its weight in total exports is 56%. The changes and fluctuations
in these exports are affected by the business activity of several companies 12.
Trends in exports to China |2011-2018
Exports of electronic components grew at an accelerated pace, but so have other industrial exports
Data analysis: Economic Unit, IEICI 11 In comparison, exports of electronic component to China exceeded total exports to Germany, the Netherlands or
Turkey (which are among the five biggest export destinations). 12 Global Intel holds assembly and testing facilities in several locations in Asia (mainly in China, Vietnam and Malaysia)
to where the chips manufactured in the company’s plants in Israel are sent.
0.8
1.2 1.1 1.1
1.6 1.6
1.4
2.6
1.5
1.3
1.5 1.5 1.5 1.6
1.8
2.1
-
0.5
1.0
1.5
2.0
2.5
3.0
2011 2012 2013 2014 2015 2016 2017 2018
Export of Electronic components (b$) Export to china - Exc. Electronic comp. (b$)
24
Another major industry exporting to China is Industrial control and measurement instruments,
which consists of equipment for controlling production process in the electronics industry. This is
an important sector in Israeli exports to China and has been growing rapidly in the past few years.
In 2018, exports of control and measurement instruments posted a 64% increase and totalled USD
450 million – 10% of total exports, after growing by 28% in 2017 to USD 275 million. Overall, in the
period 2015-2018, these exports grew by a cumulative 240%, representing an average annual 50%
growth rate.
Consistent with the upward trend in exports of the chemicals industry (for the reasons listed
above), in 2018 chemicals exports to China grew by 10% from 2017 and totaled USD 350 million
(7.5% of total exports to China). Exports of medical instruments, another major industry, grew by
18% from 2017 and totaled USD 280 million, 6% of total exports to China in the reported period.
Other sectors also saw a favorable trend, almost across the board, in comparison to 2017: exports
of minerals increased by 21% to USD 230 million, exports of machinery and equipment.
rose 10% to USD 215million,
exports of metals and metal
products increased by 12% to
USD 130 million, exports of
food and beverages rose by
20% to USD 60 million and
exports of rubber and plastic
products grew by 33% to USD
60 million. In contrast, exports
of telecommunication
equipment fell by 5% to USD
70 million and exports of
engines and electric
equipment declined by 7% to
USD 55 million.
Data analysis: Economic Unit, IEICI
-
50
100
150
200
250
300
350
400
450
500
Export to China by industries | Excl.
electronic components (in millions of USD)
2017 2018
25
Britain
In 2018, exports to Britain, Israel's largest market in Europe and its third destination globally, fell
by 17% from its levels in 2017 and totaled USD 4 billion.
Consistent with the trend of exports to the UK over the past few years, in 2018 the volatility in
exports is almost entirely attributable to pharmaceuticals. This industry has become a crucial
component in exports to the UK and as of year-end 2017 accounts for 70% (!) of total exports to
the country. As with the US, exports to the UK are affected by the dominance of the pharmaceutical
industry, which is mainly driven by Teva’s operations in the British Isle, a key market for the
company by reports. The sharp and rapid increase in pharmaceutical exports to the UK over the
past few years has established Britain as Israel’s second largest export market globally (until 2018)
and its biggest export destination among European countries.
Trends in exports to Britain | 2007-2018
Data analysis: Economic Unit, IEICI
0.2 0.1 0.1
0.9
1.81.9
2.12.2
2.5 2.5
3.7
2.8
1.5 1.5
1.1 1.11.3 1.3 1.2 1.3 1.2
1.3 1.3 1.2
10% 9% 11% 43% 57% 59% 64% 64% 68% 65% 74% 69%0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
B$
Export of Pharmaceuticals to the UK Export to the UK - Exc. Pharmaceuticals
% Share of Pharmaceuticals
26
As the graph shows, exports to Britain in 2018 saw a general downward trend – primarily due to
exports of pharmaceuticals, which fell by 23% to USD 2.8 billion (60% of total exports to Britain).
However, unlike export trends to the US, pharmaceuticals were not the only factor that pulled
down export volume to the UK. Exports of the majority of industries that sell to the UK contracted
during the year, as follows:
In 2018, exports of rubber and plastics fell by 6% to its previous-year level of USD 145 million,
agricultural exports declined by 8% to USD 95 million, exports of metal products declined by 8% to
USD 95 million. Additional, steeper declined were recoded by exports of telecommunication
equipment, which fell by 20% to USD 66 million, exports of aircraft, down 15% to USD 45 million,
and exports of industrial control and measurement instruments which decreased by 40% to USD
35 million.
Exports of chemical and oil refineries, which account for 10% of total exports, grew by 13% to USD
390 million, exports of machinery and equipment rose 25% to USD 60 million, exports of textile
and apparel rose 7% to USD 60 million and exports of food and beverages increased by 26% to USD
50 million.
The Netherlands
Total exports to the Netherlands in 2018 came to USD 2.3 billion, almost unchanged from its levels
in 2017. Like many countries in the region, exports to the Netherlands were affected by the
fluctuations in the dominant industries: pharmaceuticals and chemicals, which together account
for 42% of total exports to the country13. Exports of chemicals and oil refineries, which account for
23% of total exports to the Netherlands, fell by 2% to USD 515 million (in contrast to the overall
upward trend in this industry during the reported period).
Exports of pharmaceuticals continued the downward trend of the last few years (-16%, -12% and -
15% in 2015, 2016 and 2017, respectively). In 2018, pharmaceutical exports contracted by a further
30% to USD 270 million – half of its volume in 2015. Exports of machinery and equipment, also a
dominant industry in exports to the Netherlands which account for 19% of total exports, fell slightly
by 2% to USD 440 million.
13 Based on average data in the years 2015-2018
27
In line with the general trend in exports to EU countries, 2018 saw a mixed trend in industrial
exports to the Netherlands: exports of medical equipment rose by 12% to USD 170 million, exports
of foods and beverages soared by 40% to USD 95 million exports and exports of rubber and plastic
products increased by 2% to USD 80 million. On the other hand, exports of mineral products fell by
20% to USD 55 million while exports of office machinery and computer systems fell by 9% to USD
60 million.
Agricultural exports (USD 170 million in 2018), exports of telecommunication equipment (USD 80
million) and exports of textile and apparel (USD 50 million) remained unchanged from their level
in 2017.
Bear in mind that the Netherlands, which is a central intersection in global trade, often serves as a
gateway for many export shipments which are not necessarily sold in the Netherland markets, but
rather transported to other European countries14.
Turkey
The rally in exports to Turkey, which began in 2017 accelerated during 2018. Industrial exports to
Turkey in 2018 rose sharply by 34% to USD 1.9 billion – a 4-year high.
The positive trend was mainly attributable to the sharp growth recorded by chemicals and oil
refineries – the main industrial exports to Turkey. However, the upward trend was visible across
the board, even if we exclude this dominant industry from overall exports.
The most dominant industry in Israel's exports to Turkey is chemicals and oil refineries. The steep
decline in exports to Turkey over the last few years was naturally part of the downward trend in
the exports of this industry. Accordingly, the rise seen in 2017 and in the first half of 2018 in exports
of chemicals and refineries accounts for the growth in total exports to Turkey – a key target market.
14 Many Israeli companies have parent companies, subsidiaries or affiliates in the Netherlands, and the country
constitutes a gateway for Israeli companies to other European countries and to certain countries outside Europe.
28
Data analysis: Economic Unit, IEICI
As stated, the main component in Israeli exports to Turkey is chemicals and oil refineries. The sharp
decrease in exports to Turkey since 2014 is mainly attributable to the contraction in revenues from
this industry – primarily due to the steep decline in energy prices (although during this period
refining margins increased which boosted the overall profitability of this industry).
Owing to the recovery in energy prices over the last few years, revenues from overseas sales of
chemical and oil distillate increased and contributed to the growth in Israeli exports to Turkey –
which is the main target market for this industry. In 2018, exports of chemical and oil refineries
increased by 4% and totaled USD 1.4 billion – 74% of total exports to Turkey.
As stated, in 2018, major industrial exports to Turkey recorded sharp double-digit growth rates:
exports of engines and electrical equipment soared 46% to USD 120 million, exports of metals rose
74% to USD 55 million, exports of machinery and equipment rose by 20% to USD 35 million, exports
of mineral products rose by 44% to USD 100 million, exports of machinery and equipment rose by
21% to USD 65 million, agricultural exports increased by 25% to USD 20 million, and exports of
industrial control and measurement instruments increased by 40% to USD 20 million.
1,290
882
2,0362,238
1,260
833982
1,406
545 521 472 505 423 452 442 499
70% 63% 81% 82% 75% 65% 69% 74%0
500
1,000
1,500
2,000
2,500
2011 2012 2013 2014 2015 2016 2017 2018
M$
Trends in exports to Turkey | 2007-2018
Export of Chemicals & Oil refineries
Export to Turkey - Exc. Chemicals & Oil refineries
% Share of Chemicals & Oil refineries
29
Germany
In 2018 exports to Germany rose by 9% to USD 1.8 billion – this is the third consecutive year of
growth in exports to Germany, to their highest level in the last 7 years. Germany is the 6th biggest
market for Israeli exports globally and the third in Europe15. Exports to Germany are highly diverse,
with no single dominant industry or company that has a marked impact on exports to the country.
An analysis of exports to Germany by industrial sectors points to an upward trend across key export
industries: exports of machinery and equipment, which accounts for 13% of total exports16, grew
by 13% to USD 235 million, exports of chemicals and oil refineries rose 4% from 2017 to USD 205
million (13% of total exports).
Exports of rubber and plastics
increased by 8% to USD 160
million and exports of metal
products rose by 14% to USD 150
million – two major export
industries, each representing 9%
of total exports.
Likewise, exports of electronic
components grew by 24% to USD
120 million, exports of
telecommunication equipment
rose sharply by 50% to USD 100
million and exports of medical
equipment increased by 11% to
USD 90 million.
In contrast to the general trend in
exports to Germany but in line with trend in the industry, exports of pharmaceuticals fell by 7%
from 2017 to USD 100 million.
15 Since Holland is a passageway for goods to other destinations around the world and that goods exported from Israel
to Holland are not intended solely for this market, some consider Germany as the second most important exports market in Europe.
16 Based on average data for the years 2014-2018
1.4
1.7
1.9
1.61.7
1.6
1.41.5
1.6
1.8
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Export to Germany | third consecutive year of growth ;highest level in 7 years
(in billions of USD)
30
France
In 2018 exports to France fell by 15% from their level in 2017 and amounted to USD 1.4 billion. The
unusual decrease in exports to France is mainly attributable to the aerospace industry, following
the completion of large-scale transaction which was recorded in 201717.
Excluding the aerospace industry, in 2018 industrial exports to France overall posted a slight 3%
growth compared to 2017.
Israel mainly exports metal products, chemicals and agricultural produce to France, which
together account for half of total exports to the country. In 2018, these industries recorded a
mixed trend: exports of metal products increased by 12% to USD 380 million, exports of chemicals
remained unchanged from its level in 2017 and totaled USD 215 million while exports of agricultural
produce fell by 24% to USD 125 million.
An upward trend was also recorded by the following industries: exports of machinery and
equipment rose by 22% to USD 125 million, exports of food and beverages rose by 30% to USD 75
million, exports of medical equipment grew by 12% to USD 65 million, and exports of electronic
components increased by 40% to USD 30 million.
India
In the last few years, there has been a continued downturn in exports to India. This trend peaked
in 2017 with a further 18% decline in exports to USD 950 million, to their lowest level since 2007.
During 2018, Israeli exports to India enjoyed a significant recovery. Following a 23% increase from
2017 to USD 1.16 billion, these exports returned to their average level in the last few years
(average exports in the period 2015-2017 was USD 1.14 billion), albeit 7% below their average
over the last decade.
17 The aerospace industry is highly concentrated and subject to volatility due to the nature of transactions and sale
contracts signed by companies in this sector.
31
Exports to India | 2007-2018 (goods excl. diamonds)
Data analysis: Economic Unit, IEICI
Exports to India are highly volatile, as a result of their composition as well as the type of products
and commodities sold to India. For example, Israeli exports are largely impacted by the volume of
defense-related transactions, global commodity prices (mainly fertilizers and chemicals for
agriculture) and domestic demand, which sometimes fluctuates from one year to the next, due to
government subsidies.
Consistent with the recovery in Israeli exports to India, in 2018 there was an across-the-board
increase in the majority of industries exporting to India, some of which posted a double-digit
growth: exports of telecommunications equipment increased by 27% to USD 265 million; exports
of chemicals rose by 33% to USD 165 million; exports of minerals rose by 9% to USD 160 million;
exports of control, measurement and navigation instruments soared 185% to USD 140 million;
exports of metals and metal products rose by 20% to USD 85 million while exports of computer
systems and equipment soared 60% in 2018 to USD 25 million.
13.6%
11.1% 11.3%
2.0% 2.0% 2.4%
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
0%
5%
10%
15%
20%
25%
Exp
ort
in b
illio
ns
of
USD
% S
har
e in
Exp
ort
to
Asi
a
Export to India (in B$)
% India's Share of total export to the World
% India's Share of total export to Asia
32
Brazil
Exports to Brazil, Israel's biggest export destinations in Latin America and one of its most
important markets globally, amounted to USD 1.16 billion in 2018, up by an impressive 28% from
2017. Exports to Brazil continued to peak up, further to a sharp 21% increase in 2017 (to USD 900
million).
The growth in exports to Brazil over the last few years is attributable to the remarkable increase in
imports of minerals and chemicals, the two biggest exports from Israel to Brazil, which together
account for 70% of total exports. Exports of chemicals (which represents close to half of exports to
Brazil) totaled USD 525 million in 2018, up 45% from its level in 2017. Makhteshim-Agan, which
holds production facilities in Brazil, has considerable impact on revenues from chemical exports to
the country.
In 2018, exports of minerals (mainly potash), another major industry (accounts for 25% of total
exports) posted an 18% rise from 2017, and totaled USD 325 million. Similar to the trends in exports
to China and India, most of the changes in mineral exports are due to ICL's business activities in
Brazil.
In addition to these industries, an overall upward trend was recorded in exports to Brazil: exports
of metals rose 32% to USD 60 million, exports of rubber and plastic products rose 23% to USD 45
million, exports of machinery and equipment increased by 24% to USD 45 million, exports of textile
products increased by 31% to USD 35 million and exports of telecommunication equipments rose
by 11% to USD 30 million.
Bear in mind that Brazil – the strongest economy in Latin America and Israel's main export market
in the region – is recovering from a severe economic and political crisis, during which inflation
soared and the local currency recorded a sharp depreciation. This, together with the economic
slowdown, significantly hurt Brazilian demand for imported commodities.
Over the next few years Brazil's economy is expected to grow by 2.5% (further to a 1.2% growth in
2018). Overall in 2018, Brazilian imports grew by 7.5% while in 2019, amid slowing inflation and
growing demand for foreign goods, imports are expected to post a real growth rate of 6.5%.
33
Japan
In 2011, Japan's demand for Israeli commodities began to decline, reflected in both a decrease in
export volumes and a decrease in exports to Japan as a percentage of total exports to Asia (as
detailed below). This trend was curbed and after two consecutive years of contraction, exports to
Japan in 2017 rose by 9% to a record USD 765 million. In 2018, the positive trend continued and
even accelerated – total exports to the country soared by 30% to USD 1 billion – the highest level
recorded since the end of the 1990s.
For illustration purposes, exports to Japan in the first half of 2018 totaled USD 615 million – higher
than the export volume recorded in the whole of 2010.
Exports to Japan | 2007-2018 (goods excl. diamonds)
Data analysis: Economic Unit, IEICI
7.2%
9.7%
1.4%2.1%
0.0
0.2
0.4
0.6
0.8
1.0
1.2
0%
2%
4%
6%
8%
10%
12%
Exp
ort
in b
illio
ns
of
USD
% S
har
e in
Exp
ort
to
Asi
a
Export to Japan (in B$)
% Japan's Share of total export to the World
% Japan's Share of total export to Asia
34
Japan is currently Israel's third biggest export market in Asia. As of 2007, there has been a decline
in exports to Japan as a percentage of total exports to the continent, dropping from 12.6% in 2007
down to 6.4% only in 2015. However, over the last few years, as exports to Japan began to pick up,
there was a commensurate increase in its share of total exports to Asia.
In the last few years Israeli exports to Japan began to pick up, expressed in the continued rise in
Israeli exports to Japan as a percentage of total exports to Asia. As mid-2018, exports to Japan
accounted for 11% of total exports to Asia – almost twice its weight in 2015. Accordingly, Japan's
share in total exports grew by approx. 1% - from 1.6% in 2015 to 2.5% in the first half of 2018.
Israel main exports to
Japan include metal
products, control,
measurement and
navigation instruments18,
chemical products, medical
instruments and foodstuff
– together these account
for more than 70% of total
exports to Japan.
The sharp increase in
exports to Japan in 2018
was recorded across the
board in every major export
industry, which posted a double-digit growth compared with exports volumes in 2017. Exports of
metal products grew by 60% to USD 205 million; exports of industrial control and measurement
instruments (which mainly consists of equipment for production process control in the electronics
industry) grew by 40% to USD 160 million; exports of chemicals increased by 20% compared to
2017 and totaled USD 130 million; exports of medical instruments rose by 10% to USD 110 million
and exports of food and beverages grew by 20% to USD 80 million.
18 This sector is part of the semiconductor industry, and affected by the changing demand for semiconductors. Most of
the companies in this industry develop, produce and sell control and processing equipment and systems for the global semiconductor industry.
0%
5%
10%
15%
20%
25%
Exports to Asia| share of leading destinations in
total exports (excl. China)
India Japan S. Korea Hong Kong
35
Despite the sharp growth in exports to Japan and the impressive upward trend witnessed across
export industries – bear in mind that Israeli exports to Japan are still below their levels in the
past. Average annual exports in the years 2010-2018 was USD 810 million19 – 11% below average
annual exports in the 1990s, which amounted to USD 915 million. In the second half of the 1990s,
Israeli exports to Japan averaged more than USD 1 billion annually. However, in comparison with
the average exports in the period 2000-2009, which stood at USD 750 million, there has been an
increase in the volume of exports to Japan over the past 8 years.
Israel-Japan Trade | imports are growing and exports are picking up
Imports and exports incl. diamonds in billion of dollars, 1990-2018
Data analysis: Economic Unit, IEICI
19 Including export of diamonds, although diamond exports to Japan are relatively negligible
(2,500)
(2,000)
(1,500)
(1,000)
(500)
-
500
1,000
1,500
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
Export of Goods Import of Goods Trade Balance
36
Annual growth rate in exports to leading destinations | 2018 vs. 2017, USD million
Top export markets;
% of annual growth in 2018/2017 vs. % of annual growth 2017/2016
Data analysis: Economic Unit, IEICI
USA
China
U.K
Netherlands TurkeyGermany
France
India
Brazil
Japan
S.Korea
Italy
Spain
Belgium
Canada
Russia
Greece
Hong Kong
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
-30% -20% -10% 0% 10% 20% 30% 40% 50%
%A
nn
ual
Ch
ange
16
/17
%Annual Change 17/18
37
The contribution in US dollar terms of growth in exports to leading destinations | 2018 vs. 2017, USD million
Top export markets;
% of change in exports in USD million
Data analysis: Economic Unit, IEICI
-900-800-700-600-500-400-300-200-100 0 100 200 300 400 500 600 700 800 9001,0001,1001,2001,3001,4001,500
China
Turkey
Cyprus
Brazil
Japan
India
Germany
Canada
S. Korea
Italy
Spain
Greece
Netherlands
Hong Kong
Russia
Belgium
Taiwan
France
U.K
U.S
38
Exports of Services
In line with the overall trend of the past few years, 2018 saw the continued accelerated growth
in exports of services. Considering the accelerated growth of this sector and especially given the
slowdown in goods exports, this sector continued to be the main driver of expansion in Israeli
exports while contributing to the positive trade balance.
As we estimated in our previous report, in 2018 exports of services rose by 12%, to an all-time-
high volume of USD 50 billion20. This increase is mainly attributable to exports of Hi-Tech services
(further to the trend of the last few years), and to the continued recovery in exports of tourism
services.
The services sector currently accounts
for 45% of total Israeli exports – it
highest level ever. It is noted that the
accelerated increase in services exports
in 2018 followed several years of
growth: in 2017 these exports rose by
13% after growing by 7% in 2016
(compared to more moderate growth
rates of 3% and 2% in 2015 and 2014,
respectively).
The accelerated growth in services
exports over the last few years was the
main contributor to Israel's positive
balance of payments. However, the
rapid increase in goods imports21 has
widened the trade account deficit which
in 2018 amounted to USD 16.5 billion.
While the stable growth in services exports has led to a services account surplus of USD 19.2 billion,
the trade balance surplus contracted by 53% to USD 2.7 billion (compared to a surplus of USD 5.9
billion in 2017 and USD 9.6 billion in 2015).
20 As published in December 2017 21 In 2018 there was a 12% growth in goods imports, up to USD 77 billion. This is mainly attributable to the rise in energy
prices and exceptionally large imports of vehicles and machineries for the manufacture of electronic components.
-20
-15
-10
-5
0
5
10
15
20
2018201720162015
in B
illio
ns
of
USD
Goods Trade Balance Services Trade Balance
39
The trade balance and the current account surplus | 2014-2018 Seasonality-adjusted data, in USD million
The balance-of-service surplus has grown but so has the deficit in goods | Seasonality-adjusted data, in USD million
Data: balance of payments, CBS; processing and analysis: IEI economic unit
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
X-XIIVII-IXIV-VII-IIIX-XIIVII-IXIV-VII-IIIX-XIIVII-IXIV-VII-IIIX-XIIVII-IXIV-VII-IIIX-XIIVII-IXIV-VII-III
20182017201620152014
Trade Balance (Goods&Services) Current Balance (Total)
-6,000
-4,000
-2,000
-
2,000
4,000
6,000
X-XIIVII-IXIV-VII-IIIX-XIIVII-IXIV-VII-IIIX-XIIVII-IXIV-VII-IIIX-XIIVII-IXIV-VII-IIIX-XIIVII-IXIV-VII-III
20182017201620152014
Goods Trade Balance Services Trade Balance Trade Balance (Goods&Services)
40
As stated, the growth in the services industry's exports is mainly attributable to the exports of
Hi-Tech services, in line with the trend of the past few years. Total sales of hi-tech services in 2018
amounted to USD 29 billion – up 18 % from their record level in 2017. The Hi-Tech sector currently
accounts for 58% of revenues from services exports – compared to 55% of total services exports in
2017 and 47% of in 2014.
This trend is also indicative of the rising importance and contribution of the software and
computer services sector as Israel's leading export industry. In 2018 the accelerated growth of
these exports continued, with an 18% increase to a record USD 17.6 billion – after growing 15% in
2017 to a record USD 15 billion.
Exports of Hi-Tech Services 2013-2018| Breakdown by types of service, USD billion
Data analysis: Economic Unit, IEICI
8.910.8 11.5 12.7
15.017.6
3.3
4.04.0
4.1
4.9
5.8
2.4
0.50.5
1.7
1.7
2.3
1.42.2
2.4
2.4
2.5
2.7
0.57
0.510.54
0.47
0.48
0.48
-
5
10
15
20
25
30
2013 2014 2015 2016 2017 2018
B$
Telecom services Services for hi-tech industry
Services from start-up companies R&D services
Computer and Software services
41
The same favorable trend was recorded by other Hi-Tech services sectors: exports of R&D services22
grew by 18% to USD 5.8 billion and total exports of services to the Hi-Tech industry amounted to
USD 2.7 billion, up 7% from 2017. Exports attributed to the sale of start-up companies23 were
estimated at USD 2.3 billion in 2018 – up 37% from 2017. Exports of telecom services remained
unchanged at USD 475 million.
Exports of Services 2013-2018| Hi-Tech and other sectors
in billions of USD
Data analysis: Economic Unit, IEICI
22 Consists of scientific research & development services only, including technological incubators and start-up
companies. Excluding software R&D centers which is classified under "exports of computer and software services". 23 According to the CBS, sales of Israeli start-ups to foreign residents are recorded as export of services in the balance
of payments if the sale includes the transfer abroad of intangible assets.
18.5 18.9 18.6 18.0 20.2 21.3
16.4 16.9 18.3 21.5
24.528.8
0
10
20
30
40
50
60
2013 2014 2015 2016 2017 2018
Rest of Services sectors Export of Hi-tech Services
42
Hi-Tech Exports | analysis by industry and services
A summary of exports data by Hi-Tech sectors (industry and services) shows that Israeli Hi-Tech
exports grew by 7% in 2018 to a total of USD 50.5 billion – the highest Hi-Tech export level ever
recorded, and they currently account for 46% of total Israeli exports.
As shown in the previous chapter ("exports of services"), the trend witnessed over the last few
years, of an accelerated growth in exports of Hi-Tech services, has become a significant engine
driving the growth of the Hi-Tech sector in general and Israeli exports in particular.
Exports of Hi-Tech services primarily include computer and support services (IT, information
integration, outsourcing, etc.), sale of software, sale of software licensing, sale of patents and
knowhow, sale of start-ups' knowhow and services and R&D services to global companies.
As stated, total exports of Hi-Tech services in 2018 amounted to USD 29 billion – up 18% from
2017. Exports of computer and software services, which also include R&D services to global
companies operating in Israel, rose 18% to USD 17.6 billion.
In contrast, exports of industrial Hi-Tech (equipment and products) fell by 5% in 2018 to USD 21.7
billion. It is noted that pharmaceutical exports, which fell by 22% from 2017, had a material impact,
as did exports of aircraft, which plummeted by 27%. On the other hand, exports electronic
components rose sharply by 20%, exports of medical equipment increased by 8% and exports of
computer equipment, electronic and optical instruments grew by 10%.
Israeli Hi-Tech exports | by sectors, 2015-2018 (USD billion)
- 5.0 10.0 15.0 20.0
Computing services & Software
Computing, Electronic & Optical equipment
Pharmaceutical products
R&D Services (exc.start-up companies)
Electronical components
Services for the Hi-tech Industry
Aircraft
Exports of services from start-up companies
Medical & Surgical equipment
Telecommunications Services
Data analysis: Economic Unit, IEICI
2015 2016 2017 2018
43
The rising weight and significance of Hi-Tech service sectors has peaked during the last few years
and today Israel is exporting more Hi-Tech services. In 2017, exports of Hi-Tech services outpaced
those of industrial Hi-Tech, reaching 51.8% of total Hi-Tech exports (USD 24.5 billion), compared to
48.2% for industrial Hi-Tech (USD 22.8 billion). This trend has accelerated in 2018: exports of Hi-
Tech services amounted to USD 29 billion in 2018 (57% of total Hi-Tech exports) compared to USD
22 billion for industrial Hi-Tech (43%).
Accordingly, there has
been a sharp increase in
revenues from exports of
Hi-Tech services, as
compared to continued
stagnation for exports of
industrial Hi-Tech. As of
2013, exports of Hi-Tech
services almost doubled,
recording a cumulative
increase of 80% and an
average annual growth
rate of more than 12%. In
contrast, during the same
period exports of Hi-Tech equipment and products grew by a cumulative rate of 4% only – an
average annual growth rate of less than 1%.
15%
10%
3%
6%
16%4%1%
30%
10%4%
Pharmaceutical products
Electronical components
Medical & Surgical equipment
Aircraft
Computing, Electronic & Optical equipment
Services for the Hi-tech Industry
Telecommunications Services
Computing services & Software
R&D Services (exc.start-up companies)
Exports of services from start-up companies
21.1 21.7
16.4
28.8
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
2013 2014 2015 2016 2017 2018
in B
illio
n o
f U
SD
Trends in Hi-tech Export from Israel | 2013-2018
Hi-tech industries Exports
High - technology Services
44
Forecast for 2019
The revised economic output growth, recently been published by leading international financial
institutions, show that global economic activity is expected to slow down somewhat in the next
few years. The growth projections have been revised downward amid the expansion of
protectionist policy and the aggravating trade wars (despite ongoing negotiations). These
restrictive factors are compounded by concerns over the impending Brexit and the uncertainty
about possible implications on the regions' economies, the slowing economic activity of leading
Euro countries (mainly Germany and Italy) as well as the projected decline in China's economic
growth.
As a result, the International Monetary Fund (IMF) is expecting global economic growth to
continue slowing for the second consecutive year to 3.5% in 2019– below the average 3.75%
economic growth in the years 2017-2018 and similar to the average rate recorded in 2014-2015
(3.5%).
Source: World Economic Outlook, Jan 2019 (IMF)
2.1%2.3%
1.7%
2.4% 2.3%
2.0%
1.7%
4.7%
4.3% 4.4%
4.7% 4.6% 4.5%
4.9%
3.6% 3.5%3.3%
3.8% 3.7%3.5% 3.6%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
2014 2015 2016 2017 2018 2019* 2020*
Global growth forecast 2014-2020| IMF
Advanced economies Emerging market and developing economies World
45
Global trade growth has also been revised downward. After expanding by 5.3% in 2017, global
trade slowed to 4% in 2018. According to the IMF, global trade in 2019-2020 will remain at 4%.
The growth in imports by developed countries, which account for more than 60% of Israeli exports,
slowed to 2.7% in 2016, but then picked up to 4.3% in 2017. In 2018, imports grew by 3.2% and
according to the IMF, in 2019 demand by developed countries will rise to 3.5% and slow back to
3.3% in 2020.
In 2011, the growth in imports by developing countries began to shrink, hitting a low point of 0.3%
only in 2015 and 1.8% in 2016. In 2017 and 2018, demand for imports picked up considerably with
a growth rate of 7.1% and 5.4%, respectively. The outlook for 2019-2020 estimates an average
annual growth rate of 4.8% - 5% in 2019, and 5.2% in 2020.
4.7%
4.2%
5.4%
4.0%
3.5%
4.8%
World Trade Volume Advanced Economies Emerging Markets
Source: IMF, Data analysis: Economic Unit, IEICI
World trade | growth estimates for 2019 revised downward
Apr-18 Jul-18 Oct-18 Jan-19
46
World trade growth & forecast 2014-2020| IMF
Source: IMF, Data analysis: Economic Unit, IEICI
The export growth forecast model | 2019
The IEI's model takes into account, based on the outlook of leading research firms – the change
in the weighted imports of Israel's major target markets. This provides a reliable estimate of the
direction to which commodity exports will move in the near future. Our model clearly shows the
steep decline in the aggregate weighted imports of these countries over the past few years and the
corresponding stagnation in commodity exports, which aggravated in 2015. In 2016, the model
pointed to a slight recovery and a more moderate decline while for 2017-2018 it predicted the
sharp rise in demand for imports, consistently with the growth in global trade and in Israeli exports.
For 2019, the model projects a continued growth in demand, albeit at a slower pace than that
recorded over the last two years. In 2020, the growth rate will moderate further.
3.4%
2.7%
2.2%
5.3%
4.0% 4.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
2014 2015 2016 2017 2018 2019*
% Import Growth - Advanced Economies
% Import Growth - Emerging Markets and Developing Economies
% World Trade Growth
47
Growth in demand by major export market | 2014-2020
Our estimates regarding the implications of trade wars on Israeli exports remain unchanged. As
we predicted for 2018, at this point the consequences on Israeli exports are not likely to be
negative – this estimation applies to 2019 as well.
The services sector in general and Hi-Tech services in particular, will continue to be a significant
component in Israeli exports - although their growth rate will slow in comparison with recent
years. Goods exports will continue to grow at a relatively moderate pace, in line with the trend
in 2018. The electronic components and aerospace industries will have a favorable impact on
exports while the slowing growth in chemical exports and the decline in pharmaceutical exports
will have the opposite effect.
A further deceleration in the dollar vis-à-vis the shekel, especially in view of the predicted
increase in the current account surplus, will have an adverse impact on export growth.
Weighing the exports of goods and services, we predict that in 2019 Israeli exports grow by 5% in
dollar terms - to a total of USD 116 billion. Assuming these forecasts and the IMF's projections
for an increase in global trade materialize, we estimate that in 2020 Israeli exports will cross the
USD 120 billion threshold.
2%
-6%
-1%
7%8%
4%3%
-15%
-10%
-5%
0%
5%
10%
2014 2015 2016 2017 2018 2019* 2020*
48
Source: Forecast of the Economic Unit, IEICI
94.0 95.6
103.4
110.6
116.1
70
75
80
85
90
95
100
105
110
115
120
2015 2016 2017 2018 2019*
B$
Exports of Goods and Services | *2015-2019
in billions of USD
-6.4%
1.7%
8.1%7.0%
5.0%
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
2015 2016 2017 2018 2019*
Exports of Goods and Services | *2015-2019
% Annual change
49
For further information please contact:
Itay Zehorai
Head of Economic Unit
Israel Export Institute
Tel: 03-5142803, email: [email protected]
Shauli Katznelson
Deputy Director General for Economics & Professional Services
Israel Export Institute
Tel: 03-5142961, email: [email protected]
50
Exports based on Foreign Trade Data, the Balance of Payments and
National Accounting: Differences and Adjustments
Export figures based on foreign trade data (deriving from export records) do not include
various adjustments in the calculation of goods and services exports in the balance-of-
payment:
Most of the adjustments in exports arise from the following:
1. Sales are recorded based on the work-in-progress in large plants: these plants carry
out large-scale projects, while a partial execution of the projects is recognized as a
sale that can be recorded in the company’s books. The entry in the balance-of-
payments is based on the reports of companies that use this method, while the
amounts reported by customs for such exports are deducted from foreign trade
data.
2. International trade in goods sold overseas, where such goods do not enter or exit
the country: pursuant to the new international guidelines for entry in the balance-
of-payment, these transactions are recorded as exports of goods (in 2010 such
transactions were recorded in the balance-of-services), where the purchase of
goods overseas or the cost of production overseas by subcontractors are recorded
as negative exports, and the sale of goods overseas to the end customer is recorded
as a positive export. The summary of the two transactions will be recorded as net
exports of goods.
3. Exports to the Palestinian Authority: these exports are recorded based on VAT
invoices rather than customs documents and are therefore not included in foreign
trade data.