Despite rapid and massive vaccinations, severe limitations on activity imposed

ISRAEL - In Brief 27 Dec 2020 by Jonathan Katz

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Weekly macro highlightsCorona: yesterday evening Israel entered its third closure, closing all stores except for food/pharma and allowing only deliveries from restaurants. Mobility will be limited to 1km from home. This closure is expected to continue for three weeks at least, until the number of daily infections is below 1,000 (currently 3- 3.5 thousand) and the infection ratio below one. The good news is the massive and rapid vaccination of the population: over 250 thousand have been vaccinated so far and in one month the expectation is for 4.5ml.Israel could reach herd immunity relatively early. Elections: The Israeli Parliament will disperse and elections are expected on March 23rd. This is the fourth time in two years, a sign of political instability. Nevertheless, we do not think this is necessarily a negative development this time around. The present unity coalition was barely functioning, and there was great animosity and suspicion between the Blue & White and the Likud parties. No progress was made towards reforms and the handling of the Covid crisis was rather faulty. New elections raise the possibility of a more stable and functioning government following elections. On the fiscal side, the 2021 temporary budget will be provided with an additional 50bn ILS for the Covid crisis and 20bn for other expenditures. We doubt that early elections will lead to a negative outlook downgrade by the rating agencies (although this cannot be ruled out). Israel has weathered the Covid storm relatively well: GDP contraction is expected to be relatively low (we think ~3.5% this year), the CA surplus has improved to over 6% GDP in Q320, and on the geopolitical sphere, several A...