The fiscal deficit (LTM) moved higher in June to 3.9% GDP. The fiscal deficit is increasing and is likely to breach 4% GDP this year. Wage growth has moderated recently, up 3.0% y/y in April from 3.8% in March. Israeli saving institutions reduced their FX exposure in May to 16.5% from 17.2% in April. We expect a rate hold decision today with the policy rate forecast revised down to two hikes by end-2020 (from three in the April forecast).
The fiscal deficit (LTM) moved higher in June to 3.9% GDP.
The deficit reached 6.8bn in June compared to 5.5bn in June 2018.
In 1H19, the deficit reached 21.9bn compared to 7.8bn in 1H18.
Spending of ministries is up 10.5% y/y, above the 5.1% allocation.
Revenues have expanded only modestly (1.9% y/y nominal).
Fiscal consolidation is expected in early 2020, but a stable coalition will be a prerequisite. We expect higher taxation as well.
- Incoming tourism is down 11.3% saar in Q219, and will dampen GDP growth modestly, expected to reach 1.5%-2%.
- Wage growth softened to 3.0% y/y in April from 3.8% in March.
- Consumer confidence (Poalim) has eroded in recent months, possibly due to expectations for higher taxation, and softer wage growth.
- Wage growth has moderated in May to 3.0% y/y (sa) from 3.8% in April.
- Israeli savings institutions reduced their FX exposure in May to 16.5% from 17.2% in April.
- The Business Tendency Survey in May points to some improvement relative to April, especially in industry and services, while retail is down.
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