Fiscal deficit declines sharply

ISRAEL - In Brief 08 Nov 2021 by Jonathan Katz

Positive fiscal numbers in October The fiscal budget in October reflects a fiscal surplus of 4.4bn, compared to a deficit of 20.4bn last year. The cumulative fiscal deficit LTM declined to 5.5% GDP from 7.2% last month and 11.9% in March. Revenues continue to surprise on the upside due to strong economic growth and capital gains taxation on the hi-tech sector. Revenues are up 30% y/y in January-October. Covid spending is drifting lower and non-Covid expenditures are up only 2.3% y/y. The fiscal deficit is likely to decline to below 5% GDP this year (below expectations) which supports a lower-than-planned fiscal deficit in 2022 as well (the official target is 3.9%). This is good news for the bond market as bond issuance is expected to remain low.

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