Harel Insurance: There is a good chance that with the vaccines, the growth trend in debt will change direction • "Less than 10% of Israel's external debt" • The US pours $ 2 trillion into the market
The Tel Aviv Stock Exchange // Photo: Coco
The high deficit will not pose a threat to Israel's credit rating or government funding costs in 2021, estimates Ofer Klein, head of the economics and research division at Harel Insurance and Finance.
Klein referred to the Treasury's initial estimate, according to which the debt-to-GDP ratio for 2020 will amount to about 73% - an increase of about 13% compared to 2019 - lower than earlier forecasts and from other developed countries.
"Currently, following the Bank of Israel's acquisitions, and due to the fact that less than 10% of Israeli debt is external debt, there is no threat to Israel's credit rating this year or to government funding costs."
However, Klein notes that the increase in the debt-to-GDP ratio will continue this year as well, climbing to about 80% by the end of 2021 - with the government's biggest challenge being to change the trend in the coming years.
It should be noted that according to local and international forecasts, Israel will succeed in this - assuming that the vaccines give their signals and an absolute majority of the Israeli population will be immune to the virus.
Strong signal for recovery
The forecast also indicates the Bank of Israel's announcement of an increase in the composite index for December by 0.5%, which completes an increase of 1.1% in the last two months of 2020. According to Klein, the rise in the indices is a "clear signal of a rapid recovery after the second closure."
Although in January we see a return of the index to negative territory, following the third closure and the tightening of restrictions, but the figure signals that when the restrictions are lifted, we will once again see a rapid return to economic activity.
Inflation expectations continued to rise over the past week, supported by the depreciation of the shekel, and Harel estimates that it will amount to 0.7% this year - thus covering a negative inflation of 0.7% in the past year.
The administration will be patient with China
Meanwhile, in the United States, Biden's incoming finance minister, Janet Yellen, has announced support for a further $ 2 trillion expansion of public spending, beyond a $ 900 billion plan already approved during Trump's term. The central bank governor is not expected to change The interest rate - as promised by the end of 2023. Yellen stressed China's corrupt history of intellectual property preservation, and government support for some of the industries that are causing floating prices. Trump to remove from the US stock market Chinese companies that violate human rights.
In Europe, GDP appears to be shrinking as the year begins.
The central bank in the eurozone is reacting belatedly, leaving its interest rate and emergency purchase policy at 85.1 trillion euros - unchanged.
The trade organization announced that China first surpassed the US as the main destination for foreign direct investment. In 2020, China enjoyed investment of $ 163 billion, while the US was second with $ 134 billion - a sharp decline of close to 50%, then the volume of foreign investment It totaled $ 250 billion.
In Europe, the decline following the corona was even more significant - a decline of 71% in 2020 compared to the previous year, with marked declines in the UK, Spain and Russia.