10/31/2024–|Last updated: 10/31/202401:45 PM (Mecca time)
The Central Bank of Israel warned senior bank officials about their exposure to the construction and real estate sectors, stressing the need to “carefully manage risks during this period,” and detailed its requirements for banks in terms of updated risk assessments in this area, Bloomberg reported.
Israel’s economy, especially the real estate sector, suffered heavy losses as a result of its wars in Gaza and Lebanon over the past year, in addition to the escalation of tensions with Iran, and the Ministry of Finance reduced its expectations for economic growth this year from 1.1% to only 0.4% this week.
Labor shortage
The contracting sector was affected by a shortage of workers and high costs of financing and materials. Before the outbreak of war on the Gaza Strip in October 2023, a third of the workers on Israeli construction sites were Palestinians, but the government of Prime Minister Benjamin Netanyahu prevented about 150,000 Palestinian workers from the West Bank from working. Entering Israel citing security concerns, promised to replace them and bring in other foreign workers, but so far this has proven difficult and only 13,000 Palestinian workers have arrived in Israel.
The Central Bank’s Banking Supervision Department, whose team was led in the meeting by its deputy, Or Sofer, did not restrict banks’ ability to lend to the real estate and construction sectors, but it is able to issue orders to bank officials to increase their allocations for such loans if they want, and it can also ask banks to tighten standards. Mortgage loans.
The value of construction, real estate, and mortgage loans belonging to the five largest banks in Israel amounts to about 900 billion shekels ($242 billion).
Return of workers
Banks raised their allocations for construction loans last year, but the central bank believes more efforts are needed, and Governor Amir Yaron urged the government to allow more Palestinian workers to return to Israel, and spoke of the construction industry’s problems as “of macroeconomic importance.”
Yaron expected that the war would continue until early next year, but that it would begin to decline within about a month, according to what Bloomberg reported earlier.
