Israel's deficit to reach 4% without tax hikes, spending cuts: Finance Ministry
Reuters
Published Jan 12, 2020 08:16AM ET
Israel's deficit to reach 4% without tax hikes, spending cuts: Finance Ministry
By Steven Scheer
JERUSALEM (Reuters) - Israel's budget deficit is projected to be at least 4% of gross domestic product in the next few years if the government does not make tax and spending adjustments of tens of billions of shekels, the Finance Ministry said in a report on Sunday.
A year-long political stalemate has made it difficult to take proper fiscal steps since the caretaker governments are limited in power. A third election in less than a year in March would mean a 2020 state budget would not be approved until at least the middle of the year.
In the meantime, a pro-rated version of the 2019 budget is being used.
Israel posted a budget deficit of 3.7% of GDP in 2019, above an initial target of 2.9%.
Finance Minister Moshe Kahlon has come under fire from economists who say that he and Prime Minister Benjamin Netanyahu increased spending on state subsidies for day care and other services, and gave pay rises to police and other public servants, while cutting taxes at the same time.
Kahlon has placed the blame for the gap on his ministry’s economists, saying they overestimated government income.
Analysts expect a similar deficit in 2020.
The Finance Ministry said that in 2021 the deficit would reach 4.2% of GDP unless it makes 30 billion shekels ($8.7 billion) of tax hikes and/or spending reductions. The target is 2.25% of GDP and the next government will likely raise it.
To meet a 2% of GDP target in 2022, 33 billion shekels of adjustments are necessary, the ministry said.
For 2020, the ministry expects tax income of 330.2 billion shekels, 1 billion less than in its prior estimate in June but above 2019 revenue of 317.4 billion shekels.
The ministry also trimmed its 2020 economic growth estimate to 3% from 3.2% in its prior forecast, with the decline mainly due to expectations of weaker growth in investment and private spending.
Last week, the Bank of Israel said growth this year would be 2.9% -- with 0.3% of the growth coming from natural gas production at the new Leviathan field.
The ministry projects stable growth of 2.9% to 3% between 2021 and 2023.
($1 = 3.4656 shekels)
Get The News You Want
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.