Weekly Israel Macro Wrap Up 13.4.20

ISRAEL - In Brief 12 Apr 2020 by Jonathan Katz

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With Israel maintaining a nearly completely shut down, the number of unemployment (or forced non-pay vacation) represents 25% of the workforce. Plans are underway to gradually open up the shutdown following the Passover holidays on April 19th. The number of new Covid-19 infections has declined in the past few days.The MPC decided to reduce rates to 0.1%, and in addition to provide 3-year loans to the banks at 0.1% interest, contingent on providing loans to small and medium sized businesses. In addition, the BoI will allow corporate bonds (in addition to government bonds) as collateral in the repo market. In the press conference, Governor Yaron hinted that lower rates are conditional on further deterioration of economy activity, beyond what is in their base case scenario.The research dept expected GDP growth to decline by 5.3% this year but increase by 8.7% in 2021. Inflation is expected to reach -0.8% this year and 0.9% next year. This forecast includes a rate forecast of 0.0% to 0.1% by end 2020 and 0.0% to 0.25% by the end of 2021. The negative growth forecast in 2020 is made up of a 5.0% decline in private consumption, a 11% decline in investments and a 15% decline in exports. Public consumption will increase by 5%. Unemployment (ages 25-64) will average 6% for all of 2020, but 8% in the second half of the year.In March the BoI purchased 8.5bn ILS government bonds, did 5.5 bn repo transactions and 7.5bn USD in shekel/dollar swaps. The BoI is committed to purchasing a total of 50bn ILS in govies, in the short term (according to the Governor).The fiscal deficit in March jumped 15.9bn ILS, compared to 3.6bn in March of last year, as tax revenues contracted by over 20%,...