Bottom line: April saw a further improvement in the fiscal situation, maintaining the positive trend. There are no signs of weakness in the economy in these data– on the contrary, the increase in revenues at a faster-than-planned rate shows that economic activity is still expanding, at least in the domestic economy.
It is probable that the budget situation is actually even better than the published data indicate, but the Treasury has no interest in portraying an excessively positive picture in the run-up to the Cabinet’s debate of the 2015 budget framework.
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- The twelve-month trailing deficit, as a percentage of GDP, fell to 2.5% in April, from 2.65% in March — the lowest level since the global crisis (see graph below).
- The cumulative deficit for the first four months of 2014 amounted to a mere NIS1.0bn, compared to NIS7.5bn in the same period of 2013 — and represented only some 3% of the 2014 deficit target of NIS31bn.
- Spending by the civilian ministries rose in line with its targeted increase and on a year-to-date basis represents some 28-29% of the total budget. Defence spending, on the other hand, has already consumer over 35% of the 2014 defence budget — with the Defence Ministry seeking an increase for next year.
- Comparisons of specific spending and revenue items in April 2014 and the parallel data of April 2013 were distorted in many cases by the fact that Passover this year fell in mid-April, whereas last year it was in late March. Consequently, a comparison of year-to-date data for the first four months of each year is more useful.
- Revenues for January-April were NIS3.9bn above forecasts, of which NIS0.8bn represents a one-off ‘windfall’ from capital gains on the sale of companies. The remaining ‘surplus’ of NIS3.1bn was roughly evenly split between direct and indirect taxation revenues.
Graph: The budget deficit as a percentage of GDP 2011- April 2014