- Bottom line: The budget deficit for 2013 came in at NIS33.2bn, or 3.13% of estimated GDP – even lower than expected. Beyond that, the latest data contained no surprises and they point to two key conclusions: the good news is that the Treasury is on top of the fiscal situation, with spending comfortably under control. The less good news is that here is little room for maneuver and no room for complacency. If anything goes wrong in 2014, whether at home or abroad, the budget will be severely stretched.
- The Finance Ministry’s monthly and annual summary budget data finally appeared on Tuesday, January 13. In addition to being late, it seemed contradictory and a source of confusion, as the written comments jarred with the various tables, graphs and charts, because of conflicting definitions of what was being measured, and how.
- Cutting through the verbiage, it would seem that there is an underlying problem on the revenue side. The hefty increases recorded in 2013 were due to one-off factors, whether tax rises or windfall profits (sales of large companies, the deal over “captive taxes”). The underlying trend points to weakness in the economy.
- It is abundantly clear that the strong shekel is hurting government revenues, notably in VAT on imports. The implicit message is that the revaluation is a drag on the economy and will have a cumulative impact going forward.
- Offshore gas started flowing in 2013, but tax revenues from the sector are still years away. Meanwhile, the government has lost a chunk of income from taxes on the import of oil – which the opening of the Tamar field has reduced sharply!
Spending remains firmly under control, which is critical. However, the defence budget is soaring, as even the official data show a 20%+ increase over 2012. Expect this to remain a hot item on the public agenda, with growing concern and protests — especially over the way the defence budget expands during the fiscal year.
Surplus / deficit of each December and of the full year, 2007-2013 (NIS mn)