Fiscal surplus in April + institutional demand for FX continues

ISRAEL - In Brief 09 May 2022 by Jonathan Katz
Fiscal deficit down to 0.6% GDPThe Minister of Finance Liberman revealed yesterday that the fiscal numbers in April continue to surprise on the positive side, reflecting a fiscal surplus in the first four months of the year. The fiscal deficit in the last 12 months declined to 0.6% GDP (May 21 through April 22), down from 1.4% last month and 4.4% in 2021. Tax revenues continues to surprise on the upside while expenditure remains subdued. This positive fiscal trend has enabled the MoF to reduce the tariff on petrol as well as supported a reduction in bond issuance, a trend which is expected to continue.Institutional demand for FX continues Israeli institutional investors purchased 4bn USD in March, following 8.3bn in December-February. Downward equity market movement “forces” institutions to purchase FX in order to maintain their FX exposure. Nevertheless, In March markets corrected upwards (briefly) yet institutions actually increased their FX exposure to 17.6% (of total assets) from 17.0% in February (purchasing 3.6bn assets, reducing FX hedge by 0.4bn), realizing that increasing FX exposure during market volatility is preferable. As we noted in our weekly report, institutional demand for FX during market volatility is supportive of shekel weakness.

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