The fiscal deficit is expected to reach 12% GDP this year

ISRAEL - In Brief 08 Nov 2020 by Jonathan Katz

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Highlights: Economic indicators continue to point to a gradual recovery The weekly credit card purchases have increased by 20% in the past three weeks (through 3.11) as the economy has opened up, but this data is unfortunately not seasonally adjusted. Data from the CBS (sa) reveal that credit card purchases are up 6.7% y/y in September (the closure commenced 18.9). Chain store sales are up 8.1% y/y in September. PC demand is supported by the lack of Israelis traveling abroad. 90 thousand traveled abroad in October 20 compare to 807k last year. The Google Mobility Index to the workplace has rebounded to close to pre-second-closure levels. On a more negative note: the CBS business sentiment survey points to expectations for slow growth ahead. The Poalim consumer confidence index increased by 1.0 point in October but remains way 30 points below pre-Covid levels. Broad unemployment increased to 22.7% (including forced furlough) in the 1st half of October due to the second closure. The fiscal deficit reached 10.1% GDP in the last 12 months (from 9.1% last month). In January-October expenditures increased by 17% y/y while revenues declined by 10%. We expect the deficit to reach 12% GDP this year. Bond market: Bond yields moved higher last week, impacted by a similar trend in the US, as well as the sharp increase in the fiscal deficit. The BoI purchased 3.4bn ILS in bonds in October and 37bn YTD. We expect yields to continue to drift higher in the short run. FX: Last week, the shekel appreciated by 1.3% against the dollar and weakened by 0.2% against the Euro. Fundamentals remain shekel supportive. The BoI purchased 0.5bn USD in October and 15bn YTD in order to slow appreciat...