Fiscal deficit reaches 8.1% GDP LTM, tax revenues surge in August

ISRAEL - In Brief 06 Sep 2020 by Jonathan Katz

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Highlights of Weekly Israel Macro Wrap Up 7.9.20 Domestic demand improved in August, but renewed closure likely: Weekly credit card purchases increased by 3.8% m/m in August, both due to summer seasonality but in addition the fact that Israelis remain home this summer is private consumption supportive.Consumer confidence improved in August, but remains way below pre-Covid levels.The broad unemployment rate (including Covid furloughs and those who lost their job but did not actively seek employment) declined slightly to 12.1% in the first half of August, from 12.4% in the second half of July.The CBS Business Tendency Survey reflects stronger activity in August but future expectations remain weak. Fiscal policy: The fiscal deficit in the last 12 months through August reached 8.1% GDP, up from 7.4% in July. Fiscal expenditure YTD is up 15.3% y/y while revenues are down 4.6%, yet we note that in August tax revenues increased by 8.9% y/y due to strong domestic demand (Israelis are staying in Israel). We still maintain our lower-than-consensus fiscal deficit forecast of 10% GDP, but much depends on the severity of upcoming closures. Politics: Following the postponement of approval for the 2020 budget until end-year, the political arena has currently calmed down. Recent polls show that the right wing/religious block will receive 65 seats if an election was conducted today, and capable of forming a coalition. In other political news, the No 2 man in Yesh Atid (center-left) Ofer Shelah is challenging Yair Lapid for the No 1 spot. The bond market: Stability in the bond market continues, despite recent fluctuation in the US T-bills. It will be interesting to note BoI bond purchas...