Victor Behar (Photo by Inbal Marmari)
The financial division of Bank Hapoalim says today that although political instability is not good for the economy, since it is the new normal, credit rating companies will not harm Israel’s rating. “Political instability is not positive for the economy, but it is the reality of recent years, and we do not think we will therefore see a change in the attitude of investors or rating companies towards the economy.”
“The government has announced its dissolution and the chances of forming an alternative coalition seem slim. In the short term this means that the caretaker government, which will be at least until November, will not be able to advance legislation without opposition co-operation. “For example, political instability is not positive for the economy, but this is the reality of recent years, and we do not believe that we will see a change in the attitude of investors or rating companies towards the economy.”
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As for the real estate market, Bank Hapoalim says that “in our opinion, the volume of construction starts is in line with Israel’s demographic needs, that is, the increase in the number of households, but it will take several years of construction larger than these to reduce past gaps.”
Regarding the fear of an inflationary outbreak in Israel, the Bank says that most of the inflation expectation curve is now within the target range, ie less than 3%, which means that the Bank estimates that inflation will converge into the price stability target (1% to 3%) within a year. Consistent with the expectations of market investors that are reflected in the yield curve.
“We expect inflation at 3.5% over the next 12 months. In our estimation, inflation will begin to decline gradually at the beginning of next year, under the influence of a more temperate global environment, but will remain at a level higher than 2%.
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“The Bank of Israel will give high weight to the interest rate decision for actual inflation, ie a decision to stop interest rate increases will be based on clear signs of actual inflation converging to the target range. In the coming months it will be difficult to reach such a conclusion.”
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