Debt Developments in the Nonfinancial Private Sector, Fourth Quarter of 2018
In the fourth quarter of 2018, the balance of nonfinancial private sector debt increased by approximately NIS 20 billion (1.4 percent) to about NIS 1.5 trillion. The balance of business sector debt increased by approximately NIS 12 billion (1.3 percent), to NIS 919 billion. Outstanding household debt increased by about NIS 8 billion (1.4 percent) during the fourth quarter, to about NIS 557 billion at the end of the quarter, with most of the growth in outstanding housing debt. The decline in the annual rate of growth of nonhousing debt continued.
The business sector’s outstanding debt
· In the fourth quarter of 2018, the balance of business sector debt increased by approximately NIS 12 billion (1.3 percent), to NIS 919 billion. The increase was mainly a result of a depreciation of the shekel by about 3.3 percent against the dollar, which increased the value of debt denominated in and indexed to foreign currency. Another factor in the increase was quantitative growth of about NIS 4.3 billion, which was mostly comprised of increases in loans from nonresidents and in bank loans. This increase was partly offset by a quantitative reduction in loans from institutional investors and by net repayments of bonds (tradable and nontradable) in Israel (Figure 1).
· For the year, there were increases in the rates of change of both debt to the banks and debt to nonbank entities. Debt to the banks increased by about 6.7 percent in 2018, compared with 3.1 percent in 2017. Debt to nonbank entities increased by about 6.8 percent in 2018, compared with a near-zero increase in the previous year (Figure 2).
· In the fourth quarter, the business sector (excluding banks and insurance companies) issued about NIS 9.3 billion in bonds, slightly lower than the average amount raised in the previous four quarters (an average of about NIS 10 billion per quarter). There were prominent bond issuances by companies in the construction and real estate industry (about 30 percent of total issuances) and by companies in the trade and services industry (about 28 percent of total issuances). In January 2019, the business sector issued bonds worth about NIS 4.7 billion, mostly in tradable bonds. This is higher than the average monthly issuances in 2018 (about NIS 3.3 billion) (Figure 3).
· In the fourth quarter, the spread between yields on CPI-indexed corporate bonds, as measured by the Tel Bond 60 index, and the yield on CPI-indexed government bonds widened by about 0.4 percentage points to about 1.53 percentage points, after narrowing by about 0.2 percentage points in the previous quarter. In January 2019, there was a slight narrowing of the spread to about 1.5 percentage points (Figure 4).
· Households’ outstanding debt increased by about NIS 8 billion (1.4 percent) in the fourth quarter of 2018, to about NIS 557 billion. The balance of housing debt increased by about NIS 6 billion (about 1.8 percent), to about NIS 360 billion, and the balance of nonhousing debt increased by about NIS 1 billion to about NIS 197 billion. However, the decline in the annual growth rate of nonhousing debt, which began at the end of 2016, continued (Figure 5).
· In the fourth quarter of 2018, new mortgages taken out totaled about NIS 16 billion, higher than the corresponding period last year (about NIS 13 billion). In January 2019 new mortgages taken out totaled about NIS 5 billion, similar to the monthly average during the fourth quarter of 2018 (Figure 6).
Links to Data and Statistics on the Bank of Israel website:
 Data on debt to banks are based on monthly balance-sheet data, and not on data from the annual financial statements, since the statements for 2018 have not yet been published.