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COUNTRY INSIGHTS

Current account surplus improves + institutions sell some FX in January
ISRAEL · In Brief · 12 Mar 2024

Yesterday's shekel depreciation (1.1% against the basket) occurred despite the increases in overseas markets and positive news regarding an increase in the current account surplus in the fourth quarter, to $10.5 billion, compared with $4.7 billion in the third quarter. The goods and services acco...

Deficit could undershoot on robust tax revenues
ISRAEL · Report · 11 Mar 2024

1. February witnessed further expansion in expenditure due to the war, while tax revenues remained stable. 2. Business sector activity continues to recover, while consumer confidence remains suppressed. 3. Israel’s issuance abroad will take some pressure off the domestic bond market.

Fiscal deficit pushes higher despite robust tax revenues
ISRAEL · In Brief · 10 Mar 2024

The fiscal deficit reaches 5.6% GDP LTM The fiscal cost of the war in the first two months reached 17.3bn ILS (0.9% GDP), including most civilian support due to the war. Total expenditures are up by 44% y/y in Jan-Feb. Tax revenues surprised on the upside, reflecting stability y/y in real terms. ...

Business sector activity continues to improve gradually
ISRAEL · In Brief · 07 Mar 2024

The Business Tendence Survey for February points to further gradual recovery in growth, although at a pace slower than pre-war. The current situation component improved slightly but remains below the pre-war level. The expectations component turned slightly net positive from net-negative. The emp...

Sharp increase in wages of non-Israeli workers will be inflationary
ISRAEL · In Brief · 05 Mar 2024

Sharp increase in wages of non-Israeli workers will be inflationary In January, average wages among Israeli workers rose 5.9% y/y, moderating from 9.1% a month ago. In January, there was an increase of 0.6% in the number of employee posts, apparently at low wage levels (which lowered the total av...

Monetary caution due to elevated uncertainty
ISRAEL · Report · 04 Mar 2024

1. Rates remained stable last week due to elevated uncertainty, both geo-political and fiscal. 2. Private consumption has rebounded since the initial impact of the war and is currently above pre-war levels. 3. The shekel continued to appreciate in expectation of an imminent cease-fire, se...

Monetary caution due to elevated uncertainty
ISRAEL · In Brief · 03 Mar 2024

The BoI preferred to err on the side of caution: The rate hold decision last week was not a major surprise as expectations were split. We think the major factors contributing to this decision were: the postponement of fiscal approval, shekel volatility following the Moody’s downgrade, and the pos...

The BOI prefers to be cautious, but signals further loosening ahead
ISRAEL · In Brief · 26 Feb 2024

The Bank of Israel decided to err on the side of caution today and kept rates stable at 4.5%. Some of the same phrases in the announcement were similar to those in the previous rate decision (when rates were cut by 0.25%): “There is a great amount of uncertainty with regard to the expected severi...

A rate cut today appears likely
ISRAEL · Report · 26 Feb 2024

1. We expect a rate cut today on the back of low inflation, a strong shekel and only a partial recovery in activity. 2. Economic indicators reflect an improvement in growth, while the lack of Palestinian workers and the large number of evacuees are slowing growth. 3. The supply/demand dynam...

Rate cut today (Monday) appears likely
ISRAEL · In Brief · 25 Feb 2024

A rate cut today is our base forecast: After some hesitation last week, we expect a cut today. Consensus is divided according to Bloomberg (11 expect a rate cut, 6 expect hold). A rate cut is supported by low and decelerating inflation, a strong shekel and only a partial recovery in economic grow...

Despite the deep contraction in the fourth quarter, the economy is recovering
ISRAEL · In Brief · 19 Feb 2024

Despite the deep contraction in the fourth quarter, the economy is recovering GDP data for October–December 23 compared with the previous three months is not really relevant to the current economic environment. The fourth quarter was the deep crisis of the disaster on October 7, a sharp decline i...

Another downside inflation print; a rate cut is on the table
ISRAEL · Report · 16 Feb 2024

1. Inflation in January (0.0% m/m, 2.6% y/y, down from 3.0%) was at the low end of expectations; presently, we give a rate cut at the upcoming meeting a 55% probability. 2. Economic indicators were generally positive last week. 3. The trade deficit declined sharply in January as exports ha...

A rate cut this month cannot be ruled out
ISRAEL · In Brief · 15 Feb 2024

Another low CPI print in January Inflation in January was stable (0.0% m/m) and slowed to 2.6% y/y from 3.0% in December. This index came in at the low end of expectations (0.0%-0.1%). Core inflation (the CPI excluding energy and fresh produce) slowed to 2.4% y/y from 2.7%. Prices of core goods t...

Shrinking trade deficit is shekel positive, at least until imports recover
ISRAEL · In Brief · 13 Feb 2024

Trade deficit declines sharply In January, the trade deficit reached 1.4bn USD compared to 2.0bn in Dec 23, and is down 58% y/y with exports up 5.7% and imports down 20.3% (due to slowing imports of private consumption and raw materials). In the past three months (Nov-Jan), industrial exports hav...

Israel’s rating downgrade with negative outlook surprises markets and reduces the probability of a rate cut in two weeks
ISRAEL · Report · 12 Feb 2024

1. Moody’s decision to place Israel on “negative outlook” (A2) resulted in higher bond yields and a weaker shekel. 2. January’s tax revenues surprised on the upside, resulting in a fiscal surplus. 3. Business sentiment continued to improve gradually in January as the economy recovers.

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