The BoI expects zero or negative inflation one year ahead

ISRAEL - In Brief 30 Aug 2020 by Jonathan Katz
Highlights: of the Weekly Israel Macro Wrap Up 31.8.20 Monetary policy: Policy rates remained stable at 0.1%, with no adjustment in the forward guidance. More interesting was the Bank of Israel macro forecast which expects inflation much lower than market expectations or that of major forecasters. The BoI see inflation at zero from Q220 to Q221 (we see 0.4%) with a lower forecast of -0.6% in a negative scenario (although realistic) or sporadic limitations on activity, assuming further waves of higher infections. Private consumption growth will increase tax revenue: Weekly credit card purchases continue to increase (by 2.9% in the last week through August 25th), both due to summer seasonality but in addition the fact that Israelis remain home this summer is private consumption supportive. Chain store sales in July increased by 0.6% m/m and 6% y/y. Hi-tech service exports are up 26% saar in Q220. Unemployment (the broad definition including furloughs) in July reached 12.3% from 11.9%. The CBS private sector survey does point to some improvement in the employment in August. The BoI currently expects GDP to contract by 4.5% to 7% this year and expand by 3%-6% next year. Politics: Early elections have been avoided for at least 120 days, as the Parliament approved the postponement of approval of the 2020 budget. The government approved an additional 11bn ILS for the 2020 budget, which is based on the 2019 budget. This additional spending will be earmarked for education and health care mostly. We note that the lack of an approved 2020 budget has been restrictive so far. The BoI expects the fiscal deficit to reach 13.2% GDP this year, while we see a lower 10% due to actual exp...

Now read on...

Register to sample a report

Register
Sign-in
Forgot your password?
Copyright 2025 GlobalSource Partners. All rights reserved. This is prepared for GlobalSource Partners’ clients and may not be redistributed, reproduced, stored in a retrieval system, retransmitted or disclosed, in whole or in part, or in any form or manner, without the express written consent of GlobalSource Partners. This is distributed simultaneously to our website and other portals used by GlobalSource Partners. The information herein was obtained from various sources and is believed to be reliable but GlobalSource Partners does not warrant its completeness or accuracy. Neither GlobalSource Partners nor any Country Analyst, officer or employee accepts any liability whatsoever for any direct, indirect or consequential damages or losses rising from any use of this or its contents.