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COUNTRY INSIGHTS

GDP numbers surprise on the upside
ISRAEL · In Brief · 16 Feb 2021

In 2020, the GDP contracted by 2.4%, less than originally expected. Q420 was especially strong and actually expanded by 6.3% saar (we had expected contraction), but closer to + 2.7% without taxes on imports. December witnessed a huge increase in vehicle imports (which are heavily taxed) due to hi...

Inflation surprises on the upside
ISRAEL · In Brief · 15 Feb 2021

Inflation in January reached -0.1% m/m compared to market expectations of -0.3% m/m. Annual inflation reached -0.4% y/y up from -0.7% in December. Core inflation (the CPI excluding energy and fresh produce) was flat (0.0% y/y), up from -0.4% y/y last month. January’s inflation surprises were most...

Foreign investors were the dominant force in the FX market in 2020
ISRAEL · Report · 15 Feb 2021

1. The main sector impacting the shekel in 2020 was “non-residents” (foreign investors), while the Israel private sector had little net impact. 2. The trade deficit expanded in January due to weak exports and strong import growth. 3. We expect inflation in January to reach -0.3% m/m an...

Foreign investors were the dominant force in the FX market in 2020
ISRAEL · In Brief · 14 Feb 2021

Highlights of the weekly macro report:In 2020, FX activity by foreigners was the main factor strengthening the shekel In 2020, foreigners (non-residents) sold 21bn USD in the FX market. The BoI purchased 21.5 bn USD in order to slow shekel appreciation. Israel savings institutions sold 10.2bn FX ...

Disposable income increases by 2.3% in 2020
ISRAEL · Report · 08 Feb 2021

Disposable income in 2020 increased by over 2% due to government transfers. M1 is up 31% y/y in December due to a limited ability to consume; this is likely to create pent-up demand and some inflationary pressure. The Bank of Israel purchased 6.8bn USD in January, but in the short term, Israel’s ...

Disposable income increases by 2.3% in 2020
ISRAEL · In Brief · 07 Feb 2021

Highlights: Disposable income increased in 2020 due to government support Total wages paid declined by 3.8%, but government support to the unemployed totaled 27bn ILS (through November). M1 increased by 32% in 2020 with less opportunity to consume. This pent-up demand is likely to support some in...

GDP contraction in Q420 likely to be modest
ISRAEL · Report · 01 Feb 2021

Economic indicators for Q420 have been fairly positive, with strong export growth (especially hi-tech services) and only a moderate decline in private consumption. The shekel stabilized last week as rapid vaccinations (supporting inflows) has been a positive factor offsetting likely BoI intervent...

GDP contraction in Q420 likely to be modest
ISRAEL · In Brief · 31 Jan 2021

Highlights:Economic indicators fairly positive in Q420, but slow in January Hi tech service exports (10% of GDP) increased by 19% in 2020. Despite the third closure, private consumption declined modestly in Q420 with credit card purchases down 1.5% q/q and chain store sales down 2.2%. January wit...

BoI FX purchases expected to neutralize positive shekel fundamentals
ISRAEL · Report · 25 Jan 2021

We view the BoI's committed FX purchases of 30bn USD in 2021 as significant, and basically neutralizing the CA surplus and net FDI. Recent economic indicators for the end of December and January point to deceleration due to the tightening of the lockdown. The upbeat development is the rapid vacci...

BoI FX purchases will most likely neutralize positive shekel fundamentals
ISRAEL · In Brief · 24 Jan 2021

We see the FX purchases neutralizing the CA surplus and net FDI. 2020 was an exceptional year with the CA surplus and FDI estimated at 40bn USD (double FX intervention of 21bn). We note that not all of the real inflows reach the FX market. Higher energy prices and a likely return of tourism in 2H...

The BoI commits to FX purchases of 30bn USD in 2021
ISRAEL · Report · 17 Jan 2021

Highlights: Inflation came in slightly below expectations • The CPI declined by -0.1% m/m (-0.7% y/y); we had expected 0.0%. • Housing rental prices surprised on the downside. • Core inflation declined to -0.4% y/y from -0.2% in November. • The PPI (exc. fuel) declined by to -1.4% y/y from...

The BoI commits to FX purchases of 30bn USD in 2021
ISRAEL · In Brief · 17 Jan 2021

Inflation came in slightly below expectationsThe CPI declined by -0.1% m/m (-0.7% y/y), we had expected 0.0%. Housing rental prices surprised on the downside. Core inflation declined to -0.4% y/y from -0.2% in November. The PPI (exc. fuel) declined by to -1.4% y/y from -1.3%. Low inflation is mos...

Deflation of 0.7% in 2020
ISRAEL · In Brief · 15 Jan 2021

December’s CPI surprised on the downside, declining 0.1% m/m (-0.7% y/y compared to -0.6% in November). Core inflation (the CPI excluding energy items and fresh produce) reached -0.4% y/y in December, following -0.2% in November. The main inflation surprise came from the housing rental item (17.2...

The BoI commits to purchasing 30bn USD this year
ISRAEL · In Brief · 14 Jan 2021

The Bank of Israel announced today that it will purchases 30bn USD in order to stem the forces supporting shekel appreciation. The shekel has appreciated rapidly since November, a trend which accelerated into January. 30bn USD is a significant amount (21bn were purchased in 2020) and could defini...

Lower than expected deficit in 2020 results in excess fiscal financing
ISRAEL · In Brief · 12 Jan 2021

The final print for the fiscal deficit in 2020 was 160.3bn ILS, or an estimated 11.7% in terms of GDP. The Ministry of Finance currently expects only a modest contraction in GDP of 3.3% in 2020 (The Bank of Israel expects -3.7%). The main reason for the sharp increase in the fiscal deficit (from ...

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