The fiscal deficit continues to contract rapidly

ISRAEL - In Brief 11 Oct 2021 by Jonathan Katz
The fiscal deficit continued to contract sharply in September, reaching 6.8% GDP (adjusted for the shift in the Jewish holidays) from 8% in August. Tax revenues are up nearly 30% in January-September, due to capital gains taxation on hi-tech exits, real-estate purchase taxation, and strong PC demand (VAT).Meanwhile, special Covid expenditures continue to decline and non-Covid spending growth remains weak (2.3% y/y). The Bank of Israel estimated last Thursday that the fiscal deficit will reach 6.5% this year, but this appears overly pessimistic and we could see a deficit of below 6%. This is positive for the bond market and we should see further contraction in bond issuance in November-December.

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