The economy recovering from the corona, now we will see how it will pass Ukraine

Rise in revenues and deficit reduction - the government debt unit concludes a year: According to the report published this morning, the Israeli economy is recovering well from the effects of the corona.

The less good news: the data is correct for the end of 2021 and may change direction in the current year

Between Ashkenazi

24/05/2022

Tuesday, 24 May 2022, 06:50 Updated: 07:06

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The Government Debt Unit in the Ministry of Finance publishes this morning (Tuesday) the annual report for 2021, at the beginning of the report, Accountant General Yahli Rotenberg writes that "2021 is a turning point in dealing with the

corona virus and its economic derivatives.

"A rapid economy and a return to the outline of solid economic growth. Also, in November 2021, the state budget was approved (for the first time since 2019). This contributed to the government's ability to execute and to the trend of economic recovery."

The report itself details the rapid recovery that the Accountant General is talking about, for example the product that recorded a decrease of 2.2% during 2020 returned to the growth outline recorded before the outbreak of the corona crisis and increased by 8.2%.

Another figure that indicates the rapid recovery of the economy is the unemployment rate, which fell from 4.8% in December 2020 to 4.2% in December 2021. In addition, there was an increase in tax revenues, which rose by 23.5%.

The deficit decreased from 11.4% at the end of 2020 to 4.4% at the end of 2021 and this is perhaps the most important figure: the public debt-to-GDP ratio decreased from 71.7% to 68.8% at the end of the year.

The Accountant General notes that the re-approval of Israel's credit rating in the years 2022-2021 by the three major credit rating companies, and the increase in the rating forecast by Moody's from 'stable' to 'positive' in April 2022 also confirms the economy's economic strength .

However, it should be noted that the data are correct for the end of 2021 which was, in many ways, a phenomenal year for the Israeli economy.

The current global situation is different (and this is also reflected in the Bank of Israel's review at the time of the decision to raise interest rates last night), given the rise in inflation, the sharp decline in the capital market, the Russian invasion of Ukraine, declining production in China and other variables. 2022

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The Accountant General of the Ministry of Finance, Yahli Rotenberg (Photo: Official Website, Gilad Artzi)

Bonds market

The debt unit in the Ministry of Finance holds a number of positions, including the unit responsible for financing the deficit and managing the treasury and government cash flow by raising local and external debt, conducting reverse tenders and swap tenders.

According to the report, the year 2020 was a challenge in debt management in light of the sharp and unexpected increase in financing needs.

In contrast, in 2021 the unit faced the opposite situation - a sharp decline in funding needs throughout the year.

This decline necessitates tactical and strategic adjustments to the fundraising program, so that despite the decline in funding needs, support for the government bond market will continue in line with the long-term strategy of the Accountant General's Division.

Another interesting statistic concerns the ways in which the state raises funds in the capital market.

The report states that as every year, most of the raising was done in the tradable local market which was characterized by a good raising environment and low interest rates at a historical level.

So out of the total raising made in the domestic market, about 97% of the total raised in 2021, 25% of them made in non-marketable designated bonds.

The designated bonds are issued to the pension funds under the Financial Services Supervision Law and bear an interest rate of 4.86%.

However, during 2021, a legislative amendment was made, which is expected to take effect in early October, replacing the designated bond mechanism with a 5.15% yield guarantee mechanism, according to the report.

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