Developments and Trends in Israeli Exports: 2014

Executive Summary

General

The return to stable growth is still not on the horizon amid the risk facing the biggest economies. These countries are still battling against high unemployment and continued deflation, while suffering from structural problems and decelerating growth rates. Global economy grew 3.3% in 2014 and is expected to grow by 3.5% in 2015. Global trade (goods and services) grew 3.1% in 2014 and is expected to grow 3.8% in 2015[1].

Exports trends in 2014

Israeli exports of goods and services, excluding the sale of start-up companies, grew 3% in 2014 to a total of $96.7 billion. With the inclusion of start-up companies, exports grew 1% only to $96.2 billion. Exports of goods (excluding exports to the Palestinian Authority) rose 2% in dollar terms in 2014 to $60 million. Exports of goods excluding diamonds remained unchanged year-over-year at $50 billion. In line with the positive trend of the last few years, in 2014 exports of services (excluding start-up companies) rose 8%. Exports of services including start-ups rose by a moderate rate of 2% from 2013.

Exports of goods

Diamond exports rose 5% in 2014 to $9.7 billion. Agricultural exports contracted 8% to $1.4 billion. Industrial exports rose by a moderate 1.5% y-o-y and totaled $48.5 billion. An analysis of export trends points to stagnation and event contraction in the dominant export industries – pharmaceuticals, chemicals and electronic components – while other sectors recorded a slight increase from 2013.

Exports by trading regions

In summary, in 2014 exports to the European Union remained unchanged compared to 2013 – as did exports to Asia. Exports to Latin America fell 4% in dollar terms and exports to Africa declined by a similar rate. A ray of light came from exports to the US which rose 6%, despite the continued decrease in pharmaceutical exports to the country.

Exports by countries

Exports to the ten biggest export targets accounted for 60% of total exports. 2014 saw an increase in exports to 5 out of 10 major export destinations, as compared to 2013, exports fell to 4 countries and remained unchanged to one country. Among the biggest 20 destinations, which account for 75% of total exports, 8 recorded an increase in exports, 11 a decline and 1 remained unchanged. Ranking first among Israel’s major target markets in the reviewed period is, as usual, the US. Consistent with the trend of the last few years, exports to the US were primarily affected by the contraction in exports of pharmaceuticals, but nevertheless grew from 2013. In contrast, exports to the UK, the second-ranking export market and the biggest in Europe, rose 4% y-o-y, in dollar terms, owing to the growth in pharmaceutical exports. Exports to Turkey, the third biggest export market in 2014 grew by 10% y-o-y. However, almost the entire growth in exports to Turkey was attributed to the drastic increase in exports of chemicals and oil distillates, which are not necessarily intended for the Turkish market. China ranks fourth among export destinations and is Israel’s biggest export target in Asia, accounting for 26% of total Israeli exports to the continent. Exports to China remained unchanged in 2014, primarily due to the decline in dominant industrial exports: electronic components, chemicals and minerals.

Among major export destinations in 2014, exports increased to the Netherlands (+19%) and to France (+6%). On the other hand, exports decreased to Spain (-16%), Italy (-6%) and to India (-5%) where exports have hit a 7-year low.

 Israel’s 10 leading export markets, 2014

Exports of goods excluding diamonds, in billions of $, % of change year-over-year

Excluding exports to the Palestinian Authority, Malaysia[2]

 table1

(*) Exports to China including Hong Kong totaled $3.2 billion in 2014

Analysis: IEI

Israel’s 10 leading export markets, 2014

table2

Analysis: IEICI

Exports of services

Exports of services (excluding start-up companies) totaled $34 billion in 2014 – an 8% growth y-o-y in dollar terms. The continued growth in services exports primarily stemmed from a sharp growth in exports of business services, which rose 13% from 2013 (excluding start-ups). The increase in these exports is attributed to the continued growth in exports of computer and software services, which rose 15% accounting for 30% of total services exports. Export of transportation services was negatively affected by the general weakness in global trade and fell 4% from 2013. Exports of tourism services in the third quarter of 2014 fell by a steep 15% y-o-y due to the repercussion of operation Solid Rock, but overall, income from tourism rose in 2014, owing to a 17% increase in the first half of 2014.

Exchange rate

In the first half of 2014, the shekel’s real exchange rate relative to the currency basket fell to a 10-year low. Despite the rapid depreciation in the shekel during the second half of 2014, overall in 2014 the shekel remained strong compared to its average rate in 2013: The real-effective currency basket in 2014 was 1.5% lower than its level in 2013 and 8% lower below the 2012 average. As aforesaid, the average real exchange rate in 2014 was the lowest in a decade. The dollar’s appreciation vis-a-vis the shekel was not reflected in the currency basket’s exchange rate, which remained at 83.7 points in the first quarter of 2014.

 

Trends in global economy in 2015

Consistently with the slow but steady upward trend, 2015 will continue to see a recovery in global trade. After slowing to an annual growth rate of 3.4% and 3.1% in 2013 and 2014, respectively, global trade (goods and services) is expected to pick up the pace to 3.8%, and according to the IMF’s forecasts, it is expected to grow by 5.3% in 2016. exports of developed market, which account for more than 60% of Israeli exports, continued to grow after two consecutive years of stagnation, and in 2014 rose 3% – a trend which is expected to persist in the next few years.

The growth in imports of developed markets has been steadily decreasing since 2012, and in 2014 was 3.6% only. This trend is expected to continue into 2015 with a growth rate of 3.2%.

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Exports in the first months of 2015

During December 2014 to February 2015, exports of goods fell by 8% in dollar terms y-o-y (December 2013-february 2014) to a total of $14.3 billion. Exports of goods excluding diamonds during this period fell 4.5% y-o-y to a total of $11.8 billion. Agricultural exports fell 28% y-o-y and diamond exports fell 21% (to a total of $2.5 billion) . Exports in dollars were affected by the sharp weakening of the Euro against the dollar. The decrease in exports during the reviewed months was also affected by pharmaceutical exports which fell 1.5% in dollar terms) and chemical exports (fell by a steep 28%). The decrease in dollar terms is attributed to a sharp drop in oil prices, which had a critical impact on the selling prices of chemical products and oil distillates.

 

Israeli Exports in 2015

The significant changes in the global environment will continue to impact Israeli exports in 2015. The trends that began in the last quarter of 2014 continued and even strengthened in 2015: sharp exchange rate fluctuations – especially the sharp depreciation in the Euro, which should have repercussions on exports to Europe, Israel’s biggest export destination, as well as the steep decline in oil prices, already affect export data in dollar terms.

In light of the aforesaid and weighing the changes in exchange rates and export prices, we estimate that exports of goods and services (excluding start-ups) will grow 1% only in 2015 in nominal dollar terms. However, the growth in global trade alongside the shekel’s depreciation against the dollar will contribute 4.5% (in quantitative terms) to exports.

* 2015 forecast of IEICI

table4

For the full report:  Developments and trends in Israel exports –2014 Report

[1]   International Monetary Fund (IMF), 2015

[2]  The 10 export destinations did not include Malaysia, which critically affected by a single industry (exports of components to Malaysia account for more than 99% of total exports.

2015-04-02T11:15:21+00:00April 2nd, 2015|General|0 Comments