The 2013 budget will total NIS 309.5 billion, an extraordinary 7% increase over the 2012 budget, states the 2013-14 state budget that Minister of Finance Yair Lapid submitted to the Knesset today. The increase is double what was originally planned. The 2014 budget will total NIS 320.3 billion, 3.35% more than the 2013 budget.
The Ministry of Finance projects 3.8% GDP growth in 2013, of which 1% growth will be from natural gas discoveries. However, it projects that growth will slow in 2014 to 3.3%. Two problematic working assumptions emerge from the projections: the first is that the slower growth is due entirely to the effects of gas, and that the austerity measures have no impact; the second is that, over the next two years, the ministry believes that the unemployment rate will not increase, but will stay steady at the current level of 6.6%.
The Ministry of Finance projects NSI 263.9 billion in tax revenues in 2013, 6% more than the NIS 249 billion in actual revenues collected in 2012. It projects a further 10% growth in tax revenues to NIS 289.2 billion in 2014. The ministry's erroneous tax revenues projection for 2012 is one of the main reasons for the huge and continuing underestimate of the deficit target.
The Ministry of Finance has set a deficit target of 4.65% of GDP (NIS 45.6 billion) for 2013, after a bitter argument with the Bank of Israel. The ministry also set a deficit target of 3% of GDP for 2014. It says that without the austerity measures on the revenues and spending sides, the 2014 budget deficit will balloon to more than NIS 60 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on June 11, 2013
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