Israeli Deficit Expected to Significantly Drop Below Target, Economists Predict

Senior economists from the investment house Leader Capital Markets have issued a surprising forecast, suggesting Israel's budget deficit for the current year will be considerably lower than the official target. In their weekly economic review, analysts Yonatan Katz and his team indicated that the deficit is likely to fall within the range of 4.0% to 4.2% of GDP, a notable improvement from the government's goal.

This projection is supported by recent budget data and an ongoing, gradual recovery observed in the business sector, coupled with a moderate inflation environment. The economists also commented on the US economy, noting that August inflation data supports the Federal Reserve's decision to raise interest rates. They highlighted the importance of the Fed members' future interest rate projections, known as the 'Dots,' and mentioned that disappointment regarding buyback programs contributed to rising US yields.

Regarding Israel's bond market, Leader Capital Markets anticipates that long-term bonds will be influenced by local political uncertainty and rising global yields, despite low domestic inflation and a controlled deficit. They noted that current inflation pricing in the bond market favors inflation-linked instruments, particularly due to concerns about increasing global commodity prices. The August inflation index in Israel is expected to rise by approximately 0.8% to 0.9%, largely due to seasonal factors.