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COUNTRY INSIGHTS

FX intervention slows as the economy recovers
ISRAEL · Report · 09 Aug 2021

1. The fiscal deficit declined sharply in July to 9.3% of GDP (LTM) from 10.1% last month. 2. The Bank of Israel reduced FX intervention sharply in July, possibly due to the economic recovery. 3. Disposable income growth remains modest, and fairly much in line with productivity growth.

FX intervention slows as the economy recovers
ISRAEL · In Brief · 08 Aug 2021

The fiscal deficit continues to contract, reaching 9.3% GDP LTM In July, the deficit reached 0.8bn ILS compared to 12bn in July 2020. Tax revenues in Jan-July are up 14% compared to Jan-July 2019. Non-Covid expenditures are up 3.4% and Covid supports have declined. We expect a deficit of close to...

FX intervention tapering
ISRAEL · In Brief · 05 Aug 2021

The BoI appears to have taken its foot off the intervention gas pedal. In July, only 0.5bn USD were purchased following 3.2bn in June and more than 25bn on 1H21. The shekel appreciated by 0.7% in July (against the basket), following a 1% appreciation in June. Pressure for appreciation has continu...

Fiscal deficit to decline sharply on robust revenues
ISRAEL · Report · 02 Aug 2021

1. In 2022, The fiscal deficit is expected to return to pre-Covid levels without any consolidation. 2. Rapid growth in tax revenues has resulted in downward fiscal deficit forecasts. 3. Rapid growth in hi-tech service exports is offsetting a worsening trade deficit; fundamentals remain...

The fiscal deficit is expected to decline sharply on robust revenues
ISRAEL · In Brief · 01 Aug 2021

Highlights: Sharp growth in tax revenues reduces fiscal deficit The MoF continues to revise its fiscal deficit forecast downwards on surprisingly strong tax revenues. Currently, MoF expect a deficit of 6.8% GDP in 2021 and 4% in 2022. This is expected to stabilize the debt/GDP ratio at around 73%...

Signs of some growth moderation in recent months
ISRAEL · Report · 26 Jul 2021

1. Recent indicators point to some “normal” deceleration as growth returns to a more sustainable pace. 2. Nevertheless, hi-tech service exports continue to surge, supportive of a strong CA surplus and shekel appreciation. 3. The second half of June witnessed strong employment growth i...

Inflation in June: no real surprises this time
ISRAEL · Report · 19 Jul 2021

Inflation came in as expected, with core inflation reaching 1.2% y/y. There are signs that some transitory inflation is dissipating. Looking ahead, we expect inflation to hover around the low end of the target as pressure for appreciation continues, offset by higher housing rental prices

Inflation in June: no surprises this time; core inflation remains low
ISRAEL · In Brief · 16 Jul 2021

June’s CPI came in at 0.1% m/m and 1.7% y/y (up from 1.5% last month), in line with domestic forecasters (and our forecast), although Bloomberg had zero m/m as the consensus. Core inflation (the CPI excluding energy and fresh produce) reached 1.2% y/y (up from 1.0% last month). As expected, the h...

Likely change in the inflation target
ISRAEL · In Brief · 12 Jul 2021

Governor Yaron spoke today at a conference on July 12 regarding inflation targeting. The idea to revise the inflation target came up actually before Covid, probably one year before. This was due to several years of undershooting the target, which I think the BoI is uncomfortable about on a credib...

A declining fiscal deficit will likely support lower bond issuance
ISRAEL · Report · 12 Jul 2021

The fiscal deficit continued to decline, reaching 10.1% GDP LTM from 12.1% in March, due to strong revenues and lower Covid spending. We expect domestic bond issuance to continue to contract, reaching 5bn ILS per month by year-end. The CBS business sector survey reflects strong orders both domest...

A declining fiscal deficit will likely support lower bond issuance
ISRAEL · In Brief · 11 Jul 2021

The fiscal deficit declines in June The fiscal deficit in the past 12 months declined to 10.1% GDP from 10.5% last month and 12.1% in March. This positive trend is due to strong revenues and declining emergency Covid fiscal support. The BoI expects a fiscal deficit this year of 7.1% GDP, we envis...

Lower bond issuance in July
ISRAEL · Report · 06 Jul 2021

Private consumption has softened in recent months, following previous pent-up demand. High-tech service exports continue to expand rapidly, supportive of shekel appreciation. The BoI maintained present policy rates at 0.1%, with the monetary statement generally upbeat in light of recent positive ...

​Some monetary accommodation removed
ISRAEL · In Brief · 05 Jul 2021

Some monetary accommodation removed The rate hold decision came as no surprise, as well as the unchanged forward guidance: “The Committee will therefore continue to conduct a very accommodative monetary policy for a prolonged time, using a range of tools as necessary, including the interest rate ...

BoI likely to suggest that bond purchasing may not be extended
ISRAEL · In Brief · 04 Jul 2021

Highlights: Private consumption slows Credit card purchases declined by 3.6% in May following an 18% increase from January to April. We estimate that credit card purchases declined by 3% m/m (sa) in June, by looking at the weekly data provided through 29.6. Chain store sales declined by 6.6% in M...

Government bond issuance reduced in July
ISRAEL · In Brief · 01 Jul 2021

MoF will reduce bond issuance in July. In July, government bond issuance will decline to 7.0bn ILS down from 9.0bn last month. We note that the weekly bond issuance remains fairly unchanged at around 1.7-1.8bn, similar to June (which had five weeks of issuance). Nevertheless, we have seen a gradu...

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