Bank of Israel
Office of the Spokesperson, External Relations and Public Affairs
BANK OF ISRAEL
Office of the Spokesperson and Economic Information
September 19, 2012
Press Release
Israel's International Investment Position (IIP), June 2012
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The value of Israeli residents' assets abroad declined by about $4.8 billion (1.8
percent) in the second quarter of 2012, to $260 billion. The increase was due
mainly to price decreases on international capital markets (some 4 percent).
The balance of liabilities to abroad declined by about $12.6 billion (5.5
percent) during the second quarter of 2012, and reached about $217 billion at
the end of June. The decrease was due mainly to the large price declines on the
Tel Aviv Stock Exchange (some 8.7 percent), but also to the continued sales of
holdings of makam and government bonds by foreign residents.
As a result of the more rapid decline in liabilities to abroad, the rapid increase
in surplus assets over liabilities vis-à-vis abroad continued during this period
(some $7.7 billion, 22.4 percent), reaching $42 billion at the end of June.
The surplus of assets over liabilities vis-à-vis abroad in debt instruments alone
continued to increase in the second quarter of 2012, by about $1.1 billion (1.9
percent), and reached about $60 billion at the end of June (a negative net
external debt).
The continued decline in Israel's gross debt to abroad since mid-2011
contributed to a decline of some 5 percentage points in the gross foreign debt
to GDP ratio, and reached 41.6 percent at the end of June.
POB 780 Jerusalem 91007 Israel
Tel: 972-2-6552712/3 Fax: 972-2-6528812 www.bankisrael.org.il
Israel's net assets abroad (the surplus of assets over liabilities) increased by about
$7.7 billion (22.4%) in the second quarter of 2012, and was around $42 billion at the
end of June. The increase in surplus assets in the portfolio derives from a decline in the
value of liability balances due to price declines in the Israeli market and the sale of
makam and government bonds. These were partially offset by price decreases on
foreign markets and withdrawals of bank deposits abroad by local banks and the
public, which reduced the value of the assets portfolio abroad.
It should be noted that since mid-2011, there has been a noticeable increase in the rate
of growth of Israel's surplus assets over liabilities vis-à-vis abroad ($18 billion), mainly
as a result of the continued decline in Israel's balance of liabilities to foreign residents
– the sale of government bonds and makam in parallel to the decline in value of Israeli
share portfolios in the local market (Figure 1).
Figure 1: The net balance of Israel's liabilities abroad
1998-2012, $ billion
Gross Assets
2
Net Liabilities (right axis)
01
2
/2
03
/2
09
/2
/2
03
/2
09
/2
03
09
/2
03
/2
/2
09
/2
03
/2
09
03
/2
09
/2
/2
/2
09
/2
03
09
/2
03
/2
/2
09
03
03
Gross Liabilities
01
1
-50
01
1
60
01
0
-40
01
0
90
00
9
-30
00
9
120
00
8
-20
00
8
150
00
7
-10
00
7
180
00
6
0
00
6
210
00
5
10
00
5
240
00
4
20
00
4
270
00
3
30
00
3
300
The balance of Israel's assets abroad declined in the second quarter of 2012 by about
$4.8 billion (1.8%), to reach $260 billion at the end of June.
The value of residents' stock portfolios abroad declined by about $1.7 billion (4.2%).
A decline of $2.2 billion derived from price decreases on markets abroad was partially
offset by net investments of some $570 million.
There were net investments in tradable bonds abroad of about $0.6 billion (2.3%),
which were offset by price decreases and foreign exchange differentials.
In addition, in other investments, there were net withdrawals by the public from
deposits with foreign banks abroad, of about $1.5 billion (12.6%). The decline in
foreign currency balances of some $1.9 billion (2.4%) also contributed to the decline in
the value of assets.
In contrast, the net flow of direct investments abroad by Israeli residents reached $0.9
billion (1.2%), following a similar amount in the first quarter of the year.
In the composition of residents' securities portfolio abroad, in the second quarter of
2012 there was a 1.1 percent increase in the direct investment component, with a
decline in deposits and financial investments.
At the end of June 2012, direct investments constituted some 40% of the value of
residents' securities portfolio abroad, with foreign bonds and other credit accounting
for some 30%, shares for some 20% and deposits for some 10%.
Figure 2: Composition of Israelis' Asset Portfolio Abroad*
45%
12/2008
12/2009
12/2010
12/2011
03/2012
06/2012
40%
35%
30%
25%
20%
15%
10%
5%
0%
Equity investments Bond investments
Credit and others
Bank deposits
Equity direct
investment
* Excluding the foreign exchange reserves.
The balance of Israel's liabilities to abroad declined during the second quarter of
2012 by about $12.6 billion (5.5%), and reached $217 billion at the end of June. The
decrease in the balance of liabilities to abroad derived primarily from price declines of
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around $8.4 billion in the Israeli stock market (12.8%), and from net sales of about
$2.9 billion (9.4%) in makam and government bonds by foreign residents.
The decline in the balance of liabilities to abroad was partially offset by the flow of net
direct investments of $2.5 billion (3.9%). It should be noted that since mid-2011,
Israel's gross liabilities have declined by some $26 billion – a combination of a decline
in the value of Israeli shares held by foreign residents on the stock market, and the
trend of selling makam and bonds during this period.
The value of nonresidents' financial portfolio on the Tel Aviv Stock Exchange
declined in the second quarter of 2012 by around $5.8 billion (20%), and at the end of
June was $23.6 billion. Nonresidents' bond holdings declined by $2.8 billion, and
reached $5.6 billion; the value of their stock holdings declined by $1.9 billion to reach
$11.5 billion, primarily the result of lower prices. (Figure 3).
Figure 3: Nonresidents' Securities Holdings on the Tel Aviv
Stock Exchange
45
40
35
$ billion
30
25
20
15
10
5
Equity and mutual funds (portfolio)
2
2
01
06
/2
1
01
03
/2
1
01
12
/2
1
01
09
/2
1
01
06
/2
0
01
03
/2
0
01
12
/2
0
01
01
09
/2
0
01
06
/2
9
03
00
Equity (direct investment)
/2
9
00
12
/2
9
/2
09
00
9
/2
06
00
8
03
/2
8
00
12
/2
7
00
03
/2
6
00
/2
06
00
/2
/2
01
09
00
6
0
Bonds
The gross external debt
Israel's gross external debt fell by $5 billion (about 5 percent) in the second quarter
of 2012, and at the end of June stood at about $95 billion. Most of the decline was the
result of about $1.7 billion in foreign residents' sales of makam, and $940 million in
nonresident investors' sales of government bonds.
The ratio of external debt to GDP at the end of June 2012 was 41.6 percent, a
reduction of 0.5 percentage points from the ratio at the end of March 2012. The
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continued decline in Israel's debt to abroad has contributed, since the beginning of
2011, to a decline of some 5 percentage points in the gross external debt to GDP ratio.
Figure 4: The Ratio of External Debt to GDP
70%
65%
60%
55%
50%
45%
/1
2
03
/1
1
/1
1
09
03
/1
0
/1
0
09
03
/0
9
/0
9
09
03
/0
8
/0
8
09
03
/0
7
/0
7
09
03
/0
6
/0
6
09
03
/0
5
/0
5
09
03
/0
4
/0
4
09
03
/0
3
/0
3
09
03
/0
2
/0
2
09
03
/0
1
/0
1
09
03
09
03
/0
0
/0
0
40%
*Gross external debt
The net external debt
The surplus of assets over liabilities abroad in debt instruments alone increased by
about $1.1 billion (1.9%) in the second quarter of 2012, and reached $60 billion (i.e., a
negative net foreign debt) at the end of June.
The balance of short-term debt assets was $112 billion at the end of June 2012, a
coverage ratio of 2.5 of short term debt.
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Figure 5: Net* External Debt
$ billion, net lending to abroad (-)
200
150
100
50
0
-50
Net External Debt
Gross External Debt
Total Debt Assets Abroad
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
06 08
/2
0
09 09
/2
0
12 09
/2
0
03 09
/2
0
06 10
/2
0
09 10
/2
0
12 10
/2
0
03 10
/2
0
06 11
/2
0
09 11
/2
0
12 11
/2
0
03 11
/2
0
06 12
/2
01
2
-100
*External debt minus assets abroad in debt instruments (i.e., excluding equity).
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