Chief economist of Finance ministry: 2022 will end with a revenue surplus of NIS 70 billion

The chief economist at the Ministry of Finance predicts that 2022 will end with a revenue surplus of NIS 70 billion compared to the projected revenues when preparing the state budget. According to the latest macroeconomic forecast of the Chief Economist, all revenues in 2022 will amount to NIS 456.6 billion, compared to a forecast of revenues of only NIS 387 billion when preparing the state budget.
This surplus, mainly due to an increase in tax revenues, led to a significant reduction in the deficit, which in May reached almost 0% relative to GDP. The surplus revenue is what has allowed the government to give up various revenues as part of the fight against the cost of living, such as part of the excise tax on fuel, or to increase the credit points for workers. However, the government is limited in its ability to increase spending.
The current update by Chief Economist Shira Greenberg was due to be published as part of the state budget for 2023. However, due to the distribution of income, the update is currently being carried out.
This update is a follow-up to two more updates made to the state revenue forecast since the 2022 budget. In October 2021 the Chief Economist had already increased the revenue forecast, and in January 2022 it updated the government on a surplus tax collection that would further increase revenue. The current update predicts an increase of NIS 35 billion in revenue compared to the latest forecast from January 2022.
Despite the sharp increase in revenues, the Department of Economics warns that the rate of sharp increase in revenues will moderate over the years, and signs of this can already be seen in tax revenues in April-May. The Ministry of Finance says that the increase in revenues is due to the release of occupied demand after the corona, turmoil in the real estate industry and an increase in value and issues in high-tech companies.
In recent months, however, amid rising global inflation and rising interest rates, there has been concern about a slowdown in each of these areas. First, the effect of occupied demand has already disappeared, real estate has not grown at a similar rate as in the past, and high-tech does not present issues and exits in the past against the background of the downturn in the financial markets.
The less encouraging news comes in the main economic forecast from the growth forecast for 2022 and 2023. Like other international bodies and the Bank of Israel, the Chief Economist reduces the growth forecast in Israel in 2022 to 4.9% and in 2023 to 3.5%. This forecast is similar to the estimates of the Bank of Israel and the OECD. The economist also raised the inflation forecast for 2022 to 4.2%, beyond the upper range of the Bank of Israel target (3%), and estimates that in 2023 the inflation rate will moderate and reach 3%.