Israeli Overseas Assets Surpass $1 Trillion, Driven by Market Gains
Israeli residents' assets held abroad have surpassed $1 trillion, according to data from the Bank of Israel. This significant increase, approximately 10% over three months, was not solely due to new capital flowing overseas. A substantial portion of the growth, about $51 billion out of a total $68 billion increase in the second quarter, resulted from the rising value of existing foreign securities.
New net investments in foreign securities during the second quarter amounted to approximately $17 billion. This indicates that the majority of the portfolio value increase reflects market appreciation rather than a proportional surge in new investments. Direct investments abroad by Israelis also grew by about $4 billion, and reserve assets increased by roughly $9 billion.
Concurrently, Israel's external liabilities rose by about $39 billion, or 6%, reaching approximately $697 billion by the end of June. Despite this increase in liabilities, the surplus of Israeli assets abroad over liabilities grew by 20%, or $53 billion, to about $316 billion.
The Bank of Israel highlighted that while the country's external financial position is strong due to accumulated overseas assets, the government's finances remain under pressure from high war-related expenditures. The financial cost of the war, which began in October 2023, is estimated to be around 350 billion shekels through 2026, excluding costs related to the recent escalation with Iran. The central bank projects the public debt to stabilize around 69% of GDP in 2026-2027, with ongoing defense spending significantly higher than pre-war levels.
Therefore, the milestone of $1 trillion in overseas assets signifies a combination of increased value of existing investments, new foreign investments, and currency fluctuations, rather than a direct influx of a trillion dollars into the Israeli economy. The strong external position contrasts with the internal fiscal pressures stemming from security needs and war expenses.
