For the first time since 2012, Israel’s current account turned negative in the first quarter of 2026, but the reason was not economic weakness. According to the Central Bureau of Statistics, the deficit was just $0.1 billion, after a $3.8 billion surplus in the previous quarter, and it was driven mainly by record profits at Israeli-based high-tech and AI firms.
Those profits showed up in the primary income account, which fell to a record deficit of $6.7 billion, while goods and services trade remained strong. The balance on goods and services stayed in a $5.4 billion surplus, with services exports again nearing $10 billion in the quarter, so the current account deterioration came from income flows, not trade.
At the same time, foreign direct investment into Israel surged to $14.1 billion in the quarter, a record high and about $2.7 billion above the previous peak of $11.4 billion in the fourth quarter of 2018. Foreign residents’ income from investments in Israel jumped to $13.1 billion, while Israelis’ income from investments abroad stayed around $6.6 billion.
The article says the explanation is that most of the profits are not actually paid out, but are reinvested in the same companies and recorded as inward investment. That is why the shekel did not weaken. Israeli direct investment abroad flipped to a net outflow of $11.7 billion, and Bank of Israel reserve assets rose by $4.5 billion. Market participants say the effect is concentrated in a small number of large tech groups, many in AI, while Israel’s net foreign asset position improved to $250.4 billion at the end of March, from $237 billion a year earlier.
