Finance Minister Yuval Steinitz 311 R.
(photo credit: REUTERS/Ronen Zvulun)
The budget deficit is expected to expand to 3.4 percent in 2012 due to an
expected tax-revenue shortfall of about NIS 11 billion, Finance Minister Yuval
Steinitz said Wednesday.
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The deficit of 2% set in the government’s
two-year budget would not be met, with tax revenues expected to reach NIS 221b.
this year, as opposed to the initial forecast of NIS 232.3b., he told the
Knesset Finance Committee.
The Treasury has also downgraded Israel’s 2012
economic growth forecast from 4% to 3.2% because of expectations of a global
economic slowdown and reduced demand for Israeli exports, Steinitz said. The
Bank of Israel and the OECD forecast growth of 2.8% and 2.9%,
“This will be a challenging year,” Steinitz said, adding
that the Israeli economy faces three major threats: the potential unraveling of
the euro zone, the prospect of a credit crunch affecting the property market,
and the feeling among members of the business sector that they have been “under
attack” since last year’s public demonstrations over socioeconomic
The business sector and foreign investors “both have a sense of
being under attack, of taunts, of threats, of fears, and the result of that is
hesitation when it comes to investments,” Steinitz said. It would only take the
withdrawal of about 10% of potential investments to cause the economy
substantial damage, he said.
Looking back at 2011, Steinitz said the
economy grew 4.8% according to Finance Ministry estimates, mirroring the 2010
growth rate. The Treasury collected NIS 211.3b. in tax revenues, the budget
deficit stood at 3.3%, and the public debt-to-GDP ratio dropped to 74%,
according to early estimates.
“This is the second year in which Israel
has grown faster than all the other developed nations,” Steinitz said. “We are
the only Western country whose level of investments in hitech, industry and
other sectors is higher than before the [last global financial] crisis. That is
the secret of our economic growth.”
Finance Ministry director-general
Doron Cohen warned that economic growth could only meet the predicted rate of
3.2% this year if exports grow by at least 2.5%.
Budget director Gal
Hershkovitz said the government must remain responsible and refrain from
increasing expenditures in an uncontrolled manner.