Israel's debt:GDP ratio nears 2020 target

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The ratio at the end of 2016 was 60.4%.

The Ministry of Finance expects an upgrade in Israel's credit rating, following the publication of 2016 figures by the Central Bureau of Statistics showing that Israel's debt-to-GDP ratio reached 60.4% at the end of the year.

The latest figure is very close to the 60% target for 2020 used in the multi-year plan for decreasing the budget deficit. The Bank of Israel has warned in the past that the target would be achievable only if the government institutes a major tax hike. In 2015, for example, the Bank of Israel called for policy measures aimed at attaining NIS 18 billion in increased revenue and spending cuts in order to fulfill the debt ratio reduction plan.

Assuming that the final Central Bureau of Statistics figures do not substantially differ from the preliminary ones, the fact that the 2020 target has already been met now will support the views of Minister of Finance Moshe Kahlon and Prime Minister Benjamin Netanyahu, who advocate tax cuts as a means of encouraging growth and increasing GDP.

Commenting on the figures at yesterday's cabinet meeting, Netanyahu said, "We have just finished the civil year and according to current economic data, and it is not yet final, this year was better than expected, even very good. We are finishing, it appears at the moment, with growth data of close to 4%. This means GDP per capita grew by almost 2%. We are seeing a dramatic decline in our national debt, what is called the 'debt-to-GDP ratio'. It brings forward our goals by several years and favorably compares with other Western countries.

"We are also seeing investments in machinery and production inputs by around 20%. This is a very major expression of confidence in the economy. People invest in what they perceive to be an expanding economy."

In his weekly review published today, Ministry of Finance chief economist Yoel Naveh expressed concern about some of the 2016 figures - mainly the ongoing slide in exports of goods, in view of the projected drop in world trade following the US presidential election results and the growing worldwide anti-globalism trend.

"The recent slowdown in world trade is also reflected in the statistics for Israel's exports of goods, which fell 2% in January-November, compared with the corresponding period in 2015," Naveh wrote. "This trend is especially worrisome, given the fact that growth in Israeli exports has lagged behind the growth in world trade in recent years." Naveh noted that in contrast to the gloomy outlook for exports of goods, exports of services were in a relatively good state.

Published by Globes [online], Israel Business News - www.globes-online.com - on January 2, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

Mutual funds, finance  phtoto to go
Mutual funds, finance phtoto to go
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