Developments in the Economy’s Basic Account over the Past Two Decades

07/06/2015 |  Reiss Shelly, Gotsman Hadar
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The basic account is an accepted aggregate for analyzing data about the economy’s balance of payments. There are various definitions for the basic account, but according to the generally accepted definition it includes the current account surplus and the net direct foreign investment (incoming investment minus outgoing investment). This paper presents data on the basic account in Israel according to its various definitions, and describes the developments and fluctuations in the basic account and its components over the past two decades.

According to the generally accepted definition, the basic account in Israel went, in 2004, from balance to surplus—a surplus that was maintained continuously through 2014. This switchover to surplus was linked to many structural changes that took place in the economy, headed by the consolidation of the high tech industry, which contributed to both the creation of a current account surplus and a significant increase in the flow of direct investments. The ongoing surplus in the basic account reflects the importing of structural capital into the economy. Looking ahead, the discovery of the natural gas reservoirs and the production of natural gas for both domestic needs and exports constitute a significant factor that will support the persistence of a basic account surplus.​