The year 2020 ended with the highest budget deficit in the history of the State of Israel but lower than expected of 160.3 billion, which is 11.7% of GDP. This was announced today (Monday) by the Accountant General of the Ministry of Finance, Yahli Rotenberg. This is compared to a deficit of NIS 52.2 billion in 2019, which is 3.7%. In December alone, the deficit amounted to a high amount of NIS 22.9 billion, compared with NIS 14.9 billion in December of 2019. In terms of the percentage of the deficit in GDP, which stood at 11.7% - this is the highest rate since the inflation crisis in 1985.
The budget deficit is mainly due to a reduction in tax revenues of NIS 22.9 billion and an increase in government expenditures of NIS 68.6 billion due to the economic plan to deal with the corona crisis. The budget deficit is among the largest in the world relative to GDP and a higher deficit is measured, according to forecasts, only in the United Kingdom, Canada, the United States, Iceland and Australia.
However, the decline in GDP was in 2020 at a relatively low rate for most countries in the world, of only 3.3%, and exports almost did not shrink in 2020. Private consumption, on the other hand, was also significantly affected by international comparisons.
A senior source in the Ministry of Finance noted favorably the relatively low impact on the world's growth in the economy, but the source stressed that the budget deficit is relatively high for many countries.
Total government expenditure in 2020 for the follow-up budget and economic plan in 2020 amounted to NIS 478.5 billion - an all-time record. The economic plan for the corona crisis amounted to NIS 137.3 billion, and the implementation of the plan in relation to the planning amounted to NIS 109.7 billion.
Expenditure by government ministries amounted to NIS 426.8 billion, of which NIS 68.6 billion under the economic plan. Expenditure by civil ministries increased by 27.6% and excluding expenditure on the economic plan increased by only 3.3%. Defense system expenditures increased by 2.1% and neutralizing expenditures on the economic program increased by only 0.7% - the lowest increase compared to all recent years.
The assistance to the economy from the state budget amounted to NIS 84.4 billion. However, not all of the funds allocated to aid were actually spent.
State revenues fell sharply, but the decline moderated right at the end of 2020. The revenue forecast on the eve of the corona crisis was NIS 361.3 billion. Tax revenues were supposed to reach NIS 330.2 billion and other revenues NIS 31.1 billion. The collection of taxes amounted to NIS 310.9 billion, a decrease of only NIS 20 billion, compared with a forecast of minus NIS 40 billion at the time of the second closure.
In the last weeks of the year, there has been a significant reduction in the budget deficit, partly due to surprising and good tax collection from recent forecasts. "There was a surprising recovery at the end of the year and the tax collection was much better than expected. Government spending was also curbed," a senior Finance Ministry official told Ynet at the time.
The deficit rate is also expected to affect the decisions of credit rating companies in the near future in relation to Israel's rating, which has not been reduced so far. However, the decisions of the two major rating agencies, Moody's and Standard & Four, not to downgrade Israel's high credit rating at this stage, were announced even before new elections were announced in Israel and before it became clear that the state budgets for 2020 and 2021 had not been approved.