Finance ministry estimates: Israel will end 2021 with a deficit of 6.8% and in 2022 with 3.9%

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by Ifi Reporter Category:Capital Market Jul 30, 2021

Israel will end 2021 with a deficit of 6.8%, and 2022 with a deficit of 3.9%. After that, the reduced outline of the deficit will continue until 2026, when it will stand at 1.5%, according to the draft decision of the state budget, which the Ministry of Finance submitted to government members this morning.
Towards the approval of the budget: The Ministry of Finance distributed to the government ministers the main points of the state budget, which includes the budget framework and the new deficit ceiling, along with the distribution of the budget according to government ministries and the Arrangements Law. In light of the political controversies surrounding the budget allocation, the current budget allocation between the various ministries has been presented at this stage in the Finance Ministry proposal according to an automatic mechanism - and it will only be summed up during or after a government debate.
According to the budget proposal, the total deficit ceiling in the 2021 budget will be 6.8% of GDP. This rate includes the deficit ceiling for the regular budget (3%) and another deficit intended for the implementation of the economic plan to deal with the corona crisis at a rate of 3.8% of GDP. This deficit is relatively low compared to earlier forecasts of the Treasury and the Bank of Israel
Following the Corona crisis, the government's high deficit reached 11.7% in 2020. The rate of recovery from the crisis will be slow, which is why the Treasury is proposing a significant change from the official deficit route of Israel that has been so far. According to the Treasury proposal, the deficit ceiling will be in a declining outline and in the 2022 budget the deficit will reach 3.9% (instead of 2% according to the current target) - and will continue to fall to a deficit of 1.5% in 2026 and beyond. To meet this goal, the government will be required to cut tens of billions of shekels in the budget in the coming years or increase revenues by a similar rate.
At this stage, only the budget of the Ministry of Defense was agreed between the ministers and Prime Minister Naftali Bennett. Under the agreements, the budget of the Ministry of Defense will reach NIS 62 billion in 2022 - of which NIS 58 billion will be in the budget base. The rest of the budgets of the government ministries will be determined as stated at the cabinet meeting.

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