Finance Ministry Rattled by Low Growth Figures

In the light of data showing a slowdown in the Israeli economy, the Ministry of Finance is considering emergency measures to encourage growth that will enable the government to stay on track in its spending and debt projections, Globes reported on Monday.

Amid disappointing growth figures, a dispute has emerged between the Ministry’s budget department, which has warned against increasing the budget deficit target from 2.5% to 2.8%, and the prime minister and accountant general, who believe that a 0.3% increase in the budget deficit should be allowed in order to increase growth-encouraging spending.

First quarter data showed a drop to 0.8% in the annualized growth rate (while the forecast for 2016 is 2.8–2.9%), along with a warning from credit rating agency Moody’s following publication of the numbers, though it did not see sufficient cause to lower Israel’s rating in the meantime.

Manufacturers Association of Israel president Shraga Brosh and economist Dr. Zeev Rotem have called for an emergency plan to stimulate the economy.

Prime Minister Netanyahu took note of the situation, and spoke of increasing infrastructure investments and increasing the Ministry of Economy and Industry Chief Scientist’s R&D budget.

Ministry of Finance budget director Amir Levy, on the other hand, stressed budgetary restraint, and mentioned concern about a reversal of the downtrend in the ratio of government debt to GDP, regarded by the credit rating agencies as the principal strong point of the Israeli economy.

According to the 2017 budgetary framework, the country faces a deviation of a deviation of almost NIS 11 billion from the legal spending ceiling and NIS 4 billion from the deficit target.

Ministry sources predicted that “magic would be needed” to close this gap.