Published On: Thu, Jul 10th, 2014

Israel : Budget Data for June and Year-To-Date

Pinchas-LandauBottom line: The budget data for June showed a deterioration, for the first time this year. The problem is concentrated on the revenue side and may be a temporary phenomenon, but the latest numbers raise warning flags as to the viability of the fiscal strength that has characterised 2014 to date. The data for the next month or two will need to be scrutinized, but the security situation is certain to have a dampening effect on economic activity and hence on tax receipts in July.

  • The deficit for June amounted to NIS4.9bn (about $1.4bn),  much the largest so far in 2014, and considerably higher than the NIS3.7bn (about $1.05bn) deficit recorded in June 2013.
  • The twelve-month trailing deficit,  as a percentage of GDP,  rose for the first time this year, from 2.4% in May to 2.5%. However, there were one-month rises in this measure during 2013, which did not mark the end of the declining trend in place since February 2013.
  • Revenues ran below expectations, for the first time in 2014. The rise in tax revenues from income tax on salaries and on self-employed persons was small, while a sharp decline was recorded in tax payments by corporations.
  • VAT receipts declined by 6.9% in real terms,  compared to June 2013. However, last June saw a surge of buying of cars and household appliances, ahead of tax increases in the budget — so that comparison between the two months may be misleading
  • Spending by civilian ministries in the first half of the year has been below budgeted levels, but the projected 7% decrease in defense spending has not materialized – it has fallen by less than 1%, and the current escalation of fighting around the Gaza Strip seems certain to boost defense spending further.

Pinchas-Landau / june-budget

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About the Author

- About Pinchas Landau is an economic and financial analyst, serving as a consultant to major financial institutions in Israel and abroad on domestic and global developments. After working in banking and investment, he moved to journalism in 1983 and served as financial correspondent of the Jerusalem Post and then as senior columnist for Globes, Israel’s business daily. He has written for many international newspapers, including the Wall Street Journal and Barrons, as well as numerous professional publications. Since 1996, Pinchas has been writing and publishing The Landau Report, a unique newsletter service which analyses economic, business and financial trends in Israel, as well as tracking Israeli and regional geo-political affairs and has attracted a global subscriber base. He has also been providing quarterly and annual reports on Israel for the Economist Intelligence Unit for 25 years. Landau is also an accomplished speaker, lecturing in English and Hebrew to audiences in Israel and overseas on a range of issues relating to Israel and the Jewish world. Born in London and educated at the London School of Economics, he and his family have been living in Jerusalem since 1976.

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