Harel: “Vaccines have taken over the Bank of Israel forecast” – General

“The rapid pace of the immunization process in Israel at present increases the Bank of Israel’s assessment of the chances of the more optimistic scenario materializing. At the same time, the Bank’s forecasts for inflation and interest rates in 2022-2021 have remained very low,” he said. Ofer Klein, Head of the Economics and Research Division at Harel Insurance and Finance. However, Klein restricts the Bank of Israel’s optimistic forecast – “Our forecast for growth is slightly lower than the Bank’s optimistic forecast (4.5% -5%), with the main difference being the Bank’s very optimistic forecast for growth in private consumption over the next two years. More”. Klein notes the recent improvement in unemployment data before the closure tightens.

Just before the restrictions on the third quarantine began, the labor force survey in Israel for the first half of December showed a decrease in the broad unemployment rate to 12.7% with a decrease in the number of temporarily absent workers (mainly Knesset) to 5.6%, along with a decrease in 4.8%. Thus we returned to the level of unemployment that was on the eve of the second closure in early September, but the figure is already less relevant due to the expectation of a return to increase due to the new restrictions.

In the US This coming Friday, the latest employment report for 2020 will be published and the initial estimates indicate a zero increase, as well as according to the total weekly requirements for unemployment benefits. Klein notes the Senate election – “Small elections mean a lot.” According to early polls the race is close (more than the presidential race) and only if the Democrats win both seats will they be able to turn the Republican majority in the Senate, using another vote that will be the tie-breaker vested in the vice president. In this scenario they will be able to pass in legislation much more generous transfer payments to the population ($ 2000 per person instead of 600 at present) alongside higher chances that long-term investments in renewable (green) infrastructure will also be passed in legislation. On the other hand, it should be borne in mind that such a win will also allow the president to realize promises that are less positive for the capital market such as his desire to double the national minimum wage and raise corporate taxes.

“China continues to increase its influence – this time on Europe.” After nearly 7 years of negotiations, the EU and China have agreed in principle on a new trade agreement in which China will allow European companies more free access to the Chinese market without the need to transfer technology to the local partner, while increasing transparency and legal protection. On the other hand, the union has waived clauses that force Chinese companies operating in the union to protect human rights. “The road to signing is still far away and only now will the administrative echelons begin to sit down and discuss the details, but if it matures into an agreement it will be especially beneficial for service companies in Europe, which unlike industrial companies, their access to China is still limited.”