The Bank of Israel is today publishing its Financial Stability Report for the second half of 2021. The Financial Stability Report is published twice a year.
  In this report, Bank of Israel economists analyze exposure to the main risks to the financial system, and assess potential risk scenarios.  The Financial Stability Report for the second half of 2021 provides an assessment of the stability of the domestic financial system based on an analysis of the environment in which it operates—the macroeconomic environment, the asset markets, and credit to households and the business sector—providing an indication of the economy’s various exposures to shocks originating in Israel and abroad.


  • The Israeli economy continued to grow in 2021, despite the COVID-19 crisis.  It was helped by the vaccination of much of the population, and supported by fiscal and monetary policy.  However, according to the Bank of Israel Research Department’s staff forecast, economic activity will reach the level that was expected prior to the crisis only after 2023.
  • The financial conditions in most countries remained accommodative, but investors remain concerned about a slowdown in the pace of recovery, mainly in the emerging markets, and about the continuation of global inflation.
  • Financial asset prices in Israel continued to increase.  Pricing indices show that the gap between financial asset prices and corporate profits is greater than in the past.
  • Home prices in Israel increased during the crisis at a faster pace than rental prices, and the increase even accelerated in recent months.  The increase in home prices is an international phenomenon, and the pace of increase in Israel is lower than the OECD average.  The likelihood of a decline in home prices in the short term currently seems low, due to the increase in demand and in view of the stable level of building starts and some slowdown in building completions.  The increase of land prices in Israel Land Authority tenders may work to raise home prices in the coming years.
  • Business sector debt increased rapidly in the past 12 months, primarily in the real estate industry.  The debt to GDP ratio increased in the past year, but remains lower than in other advanced economies (73.26 percent).
  • Household debt in Israel is lower than in other countries.
                  • ​​​​​​​​​​​New mortgages taken out in 2021 were historically high, consistent with the high number of transactions in the housing market.
                  • In contrast with the rapid growth of outstanding housing debt, nonhousing debt increased moderately following a sharp decline in 2020 during the height of the COVID-19 crisis.  However, its growth accelerated in recent months.
                  • As of the end of November 2021, payment had yet to resume in full on about 9 percent of mortgages that were deferred, and on 1 percent of nonhousing credit.  The quality of total household credit is better than during the precrisis period.
  • Financial entities, led by the banks and insurance companies, maintained stability during the report period, and enjoy strong capital ratios while the market’s assessment of their risk is low.
  • The main risk scenarios to the global economy are focused on the risk of an increase in inflation levels, the risk of a sharp decline in financial asset prices, and the risk of a new significant wave of morbidity due to the COVID-19 virus.​