Israel’s next external debt shrank another $3.4 billion during 2002, and amounted to only $680 million in December 2002, an 84% decrease, the Bank of Israel reported today.
The increase in non-banking investments has boosted Israel’s overseas assets, which led to the plunge in its external debt.
Israel’s external debt has been falling for the past several years. The next external debt has dropped by over $10 billion over the past three years, a 94% drop.
The non-banking private sector has an asset net surplus of $11 billion, after deducting its overseas liabilities. The surplus grew by about $4 billion in both 2002 and 2001.
The Bank of Israel notes that the ratio of external debt to GDP is one of the most important measures of the Israeli economy’s credit risk. The rapid growth in overseas assets has decreased this ratio substantially to only 1%. On the other hand, the ratio of gross debt to GDP continued to rise, reaching 65% at the end of 2002, compared with 60% at the end of 2001.
Israel’s gross external debt amounted to $103 billion as of December 31, 2002, down 3.5%, compared with the debt as of December 31, 2001, and following a 9% drop in 2001.
The decline in overseas debt is mostly due to negative factors, principally the fall in the value of Israeli shares traded on the Tel Aviv Stock Exchanges and overseas stock exchanges, which totaled over $8 billion. This drop reflects an average price decline of 19%. At the same time, foreign investment continued to flow, amounting to $3.8 billion, which is still far less than in 2001 and 2000.
Direct investments in Israel by foreign residents in 2002 totaled only $1.5 billion, mostly in non-listed companies.
Foreign residents bought only $800 million worth of listed shares and bonds issued by Israeli companies.
Foreign residents withdrew $800 million from bank accounts in Israel.
Foreign banks deposited large sums in Israeli banks, following the accelerated shekel depreciation against the dollar, and especially the euro.
Published by Globes [online] - www.globes.co.il - on March 9, 2003