What's Happening?
The Israeli economy is facing challenges due to a strong shekel, which has appreciated significantly against the dollar, impacting export profitability. Despite a record year for Israeli exports in 2025, with total exports reaching $164 billion, the strengthening
shekel is eroding these gains. Approximately 40% of Israel's high-tech exports are directed to the U.S., and the currency appreciation is squeezing margins as revenues are booked in dollars while expenses are in shekels. This situation is compounded by new U.S. tariffs and other economic pressures.
Why It's Important?
The strong shekel poses a significant challenge to Israeli exporters, particularly those in the high-tech sector, which is heavily reliant on the U.S. market. The currency appreciation reduces the competitiveness of Israeli goods and services abroad, potentially leading to a slowdown in export growth. This could have broader implications for the Israeli economy, affecting employment and investment in the tech sector. The situation underscores the need for coordinated government action to support exporters and mitigate the impact of currency fluctuations.
What's Next?
Israeli policymakers may need to consider measures to support exporters, such as tax policies that account for currency appreciation and incentives to keep R&D centers in Israel. The Bank of Israel has previously intervened to stabilize the exchange rate, and further actions may be necessary. Additionally, there is a need for a coordinated response from various government bodies to address the challenges faced by exporters and ensure the continued growth of the Israeli economy.
