Israel hits its 2014 deficit target despite Gaza war

Change in GDP methodology helped keep deficit at bay.

January 13, 2015 19:30
2 minute read.
THE TEL AVIV skyline; the area around the city is home to many Israeli start-ups

THE TEL AVIV skyline. (photo credit: REUTERS)


Dear Reader,
As you can imagine, more people are reading The Jerusalem Post than ever before. Nevertheless, traditional business models are no longer sustainable and high-quality publications, like ours, are being forced to look for new ways to keep going. Unlike many other news organizations, we have not put up a paywall. We want to keep our journalism open and accessible and be able to keep providing you with news and analyses from the frontlines of Israel, the Middle East and the Jewish World.

As one of our loyal readers, we ask you to be our partner.

For $5 a month you will receive access to the following:

  • A user experience almost completely free of ads
  • Access to our Premium Section
  • Content from the award-winning Jerusalem Report and our monthly magazine to learn Hebrew - Ivrit
  • A brand new ePaper featuring the daily newspaper as it appears in print in Israel

Help us grow and continue telling Israel’s story to the world.

Thank you,

Ronit Hasin-Hochman, CEO, Jerusalem Post Group
Yaakov Katz, Editor-in-Chief

UPGRADE YOUR JPOST EXPERIENCE FOR 5$ PER MONTH Show me later Don't show it again

The government’s 2014 deficit, a statistic that will likely sail a thousand campaign slogans, was lower than the original target, coming in at 2.8 percent of GDP, the Finance Ministry revealed on Tuesday.

The deficit was NIS 1.2 billion below the NIS 31.1b planned for the year, a fact former finance minister Yair Lapid, the chairman of Yesh Atid, is likely to crow about in the run-up to March’s election. Just before the January 2013 election that installed Lapid in the Treasury, voters were incensed that the 2012 deficit was more than double its original target.

Be the first to know - Join our Facebook page.

The lower-than-expected deficit for 2014, according to the Finance Ministry, resulted from an update in how the nation’s GDP is calculated (which lopped 0.1% of GDP off the deficit) and lower-thanplanned spending (another 0.2% of GDP), which were tempered by lower-than-expected revenues (which put 0.1% of GDP back onto the deficit).

Though the original budget set the 2014 deficit at 3% of GDP, which was projected at the time to be NIS 1,037.8b, the latest estimation of GDP for the year put it significantly higher, at NIS 1,087.9b. The increase was not because Israel’s economy grew more than expected (quite the opposite, in fact), but because the Central Bureau of Statistics implemented a new method for calculating GDP.

On the tax and spending side, the budgetary changes were a result of Operation Protective Edge, last summer’s war with Hamas in the Gaza Strip.

Tax revenues fell as a result of the war, which shaved 0.3% off economic growth for the year. The Defense Ministry, meanwhile, demanded more funds. Lapid responded with an across-the-board 2% slash to all the government offices (save Defense) to keep the deficit roughly in line.

He also pushed some of the costs into the 2015 state budget, and raised the deficit target for that year in excess of the Bank of Israel’s recommendations.

That controversial budget never passed, and was at the center of the coalition crisis that felled the government in December and opened the door to the upcoming election. The political instability surrounding economic policy led to warning by credit ratings agencies such as Moody’s, which termed the early election “credit negative.”

The failure to pass Lapid’s draft 2015 state budget and its inflated 3.4% deficit will likely lead to a lower deficit in the coming year, as the government reverts to a month-to-month formulation of the 2014 budget until a new budget is approved after the election.

Related Content

Soldiers gather around car crash site in Havat Gilad, 2018
August 17, 2018
Israeli woman killed in hit-and-run near Havat Gilad outpost