Israel's Election Outcome Raises Fiscal Risk, Bank Hapoalim Says
Israel's Election Outcome Raises Fiscal Risk, Bank Hapoalim Says
(Bloomberg) -- The election stalemate in Israel makes the job of forming a government particularly complicated and raises the country’s fiscal risk, one of the country’s largest banks warned on Sunday.
“There is a high degree of uncertainty as to when a government will be formed, and in the meantime, there is no approved budget for next year, and the fiscal adjustments expected to cut the deficit aren’t being made,” Bank Hapoalim Ltd.’s economic department said in a report.
Moody’s Investors Service said Friday that the results from the repeat election “pose a risk to timely fiscal consolidation.” It’s likely that the other rating companies will issue a similar warning if there is a delay in forming a government or if a third election is called, Hapoalim said.
The lender expects this year’s deficit to total around 4% of GDP, well above the original ceiling of 2.9%, and higher than the Finance Ministry’s January estimate of 3.6%.
Markets however aren’t placing much importance on the fiscal risks with nine-year government bond yields declining to levels of about 1%, according to the report. Hapoalim also said that a new government cutting the budget and/or raising taxes in an amount equivalent to 1% of GDP would avert negative responses from the rating companies.
To contact the reporter on this story: Alisa Odenheimer in Jerusalem at aodenheimer@bloomberg.net
To contact the editors responsible for this story: Shaji Mathew at shajimathew@bloomberg.net, Charles Daly, Kasper Viita
©2019 Bloomberg L.P.