The government deficit in 2013 will be substantially below the target of 4% of GDP, a top Ministry of Finance official confirmed today. The main reason for this is the Central Bureau of Statistics' new methodology for calculating GDP, announced on Sunday.
Under the new methodology, GDP in 2012 was NIS 993 billion, instead of the NIS 929 billion under the old methodology, and GDP is projected to reach NIS 1.03 trillion in 2013, assuming 3.8% GDP growth, including from natural gas.
The deficit target of 4.65% of GDP allows for a deficit of NIS 48 billion under the new methodology, compared with a deficit of NIS 45.6 billion under the old methodology - an addition of NIS 2.3 billion. The increase is permanent, and extraordinary deals (the sales of Iscar Ltd. and Waze Ltd.) will generate NIS 3 billion in tax revenues, further reducing the deficit.
"The minister's objective is to lower taxes, but we must not be rushed. The data needs to be rechecked," a source at Minister of Finance Yair Lapid's bureau told "Globes". Ministry sources added that, within a couple of months, it would be possible to assess the ramifications of the change in methodology.
"Even if the objective of ministry officials was to please the minister and cut taxes in 2014, meeting the fiscal targets of 2015 is no simple challenge, especially on the spending side," said the Ministry of Finance in response. "There are NIS 5-6 billion in commitments from previous years, including multiyear plans. The defense budget will grow again under agreements with the Ministry of Defense, the local authorities' budget will also soar, and there will be substantial increases for public sector employees who waived pay hikes in 2013-14. Therefore, by January 2015, the autopilot is already NIS 10-12 billion."
Published by Globes [online], Israel business news - www.globes-online.com - on September 9, 2013
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