Israel’s H1 current account deficit and a technical note on Nvidia and BOP accounting

ISRAEL - In Brief 17 Sep 2026 by Sani Ziv

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Balance of payments data released yesterday showed a USD 0.5bn current account deficit in Q2, following a revised deficit of around USD 0.8bn in Q1. This represents a significant change from 2025, when Israel recorded a current account surplus of around USD 8.9bn. The goods and services balance remained strongly positive, with a surplus of around USD 7bn in Q2, but this was largely offset by a primary income deficit of almost USD 7.8bn. This deficit reflects profits belonging to foreign owners, largely Nvidia’s profits from its Israeli operations. For this reason, the current account balance provides a more relevant measure of Israel’s external position than the headline goods and services surplus.Production abroad drove export growth The surplus in the goods and services account is largely due to a sharp increase in exports of goods that do not cross Israel’s borders. This item increased from around USD 12bn in 2024 to around USD 22bn in 2025 and reached almost USD 20bn in the first half of 2026 alone. This activity largely reflects production abroad by Israeli-resident companies, particularly Nvidia’s Israeli operations following the acquisition of Mellanox. Chips developed as part of the Israeli activity are manufactured abroad and sold abroad, but under balance of payments rules the transaction is recorded according to economic ownership rather than the physical location of production.This activity therefore significantly increases the goods and services surplus, but much of the improvement does not translate into the current account. Since Nvidia is foreign-owned, profits attributed to the foreign shareholder are recorded as a payment to non-residents in the prima...