Who will be the next Governor?

ISRAEL - In Brief 29 Aug 2023 by Jonathan Katz
High-tech exports expand modestly High-tech service exports (a major economic driver) increased by 1.6% m/m in June and by 9.8% y/y (sa). The second quarter witnessed growth of 4% saar. June’s strong print will most likely support an upward revision in the second estimate for Q2 GDP. Although investments into Israel’s high-tech sector have declined in 2023, many companies are expanding sales abroad. July’s business sentiment survey also reflected expectations for high tech export growth into August. This positive trend supports the shekel, although in the near term, uncertainty regarding who the next Governor will be the domestic dominant factor on FX. Who will be Governor in 2024? This is still a difficult call. We think that Netanyahu wants to replace Yaron, due to his vocal opposition to the judicial overhaul. But we still see a 20% that he gets a second term (assuming Yaron wants a second term: he will announce that next week). We see a 40% chance that no one is agreed upon for quite some time, making Deputy Governor Abir the acting Governor. We see a 30% that Netanyahu finds some recognized academic or monetary figure who is neutral regarding Netanyahu’s policies but is regarded as suitable for the position. We doubt he will appoint a less professional figure (10% chance). We note that Netanyahu appointed Stanley Fischer, Karnit Flug and Amir Yaron and realizes the importance of a well-recognized figure maintaining BoI independence.

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