(Communicated by the Bank of Israel Spokesperson)
- The government budget deficit for 2012 was 4.2 percent of GDP, compared with a target of 2.0 percent of GDP set when the budget was approved at the end of 2010, and about 1 percentage point of GDP greater than the deficit in 2011.
- Most of the deviation from the targeted deficit reflects lower tax receipts than originally projected. This gap is mostly explained by different macroeconomic developments than forecast when the budget was approved.
- Bank of Israel projections, based on decisions and programs adopted by the government, forecast expenditures for 2013 to be 9 percent greater than in the 2012 budget, and NIS 13 billion above the expenditure ceiling according to the expenditure rule approved in 2010.
- Significant additional gaps exist between the expected cost of the programs approved by the government and the expenditure ceiling in 2014 and 2015.
- If the government aligns the increase in expenditure in 2013 with the expenditure ceiling, and does not change the tax rates set in law, the deficit, based on forecast growth of 3.8 percent, is expected to be 3.6 percent of GDP, greater than the new deficit target of 3 percent of GDP adopted by the government in the summer of 2012. That is, to meet the deficit target, it will also be necessary to increase tax rates or to cancel exemptions. If the government does not adjust its expenditures, the expected deficit in 2013, based on the costs of the programs approved by the government and the tax rates set in law, is 4.9 percent of GDP.
- Without significant adjustment of the government budget—both a reduction in government commitments to increased expenditures, and higher tax receipts—the debt to GDP ratio is not expected to decline in the coming years, unless the growth rate is especially high – more than 5 percent per year, on average.
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