The deficit will return to the level it was in 2019 in about three years from today

The beautiful recovery of the Israeli economy from the Corona damage, although it is still far from disappearing, also reflects on the Treasury’s forecasts, which predict a return to a deficit of 3.7%, as it was at the end of 2019, before the outbreak, already in late 2022.

This figure does not include corona expenditures, with which the government budget deficit will reach 4.1%. This prediction is also purely theoretical as it does not include the implementations of coalition agreements and other things that the government would like to add.

According to the law, the government is obliged to present a deficit of only 2%, but according to the source in the Treasury, “We do not think that a deficit of 2% should be reduced during this period, we are in internal discussions about the level of the deficit.”

Mall during the closure (Photo: Avshalom Shashoni)

At the end of the current year, 2021, according to the Ministry of Finance’s forecast, the deficit will be about 7%, because there are still significant corona expenses – business assistance grants, unemployment benefits, Ministry of Health purchases and more.

If the expenses of the corona are neutralized, in 2021 the deficit stands at only 3.4% of GDP. That is, in 2022 there is a slight increase in the deficit without the corona expenditure mainly because at the moment the economy is still run according to the continuing budget and the expenditure is restrained.

All on the condition that the corona does not bring us back to closures

The optimistic numbers include the unprecedented volume of investment in infrastructure. For comparison, as of the end of June, the government deficit was 10.1% of GDP, so the data presented by the Ministry of Finance reflect an optimistic picture.

The chief economist of the Ministry of Finance, Shira Greenberg, presented the growth figures for the two close years: 5.1% at the end of 2021 and 4.2% at the end of 2022. Here, too, the numbers are optimistic. According to Greenberg, “There is a nice recovery of the economy, it is led by private consumption that contains significant compensation for the year 2020 – when the closures were lifted we saw a significant increase in the amount of credit card spending. We assume there is subdued demand here.

TLV Mall (Photo: Avshalom Shashoni)TLV Mall (Photo: Avshalom Shashoni)

“In terms of taxes – in the tax revenue forecast in the first closure there was a significant drop in closures, and then we saw a nice recovery. The crisis has hit weaker populations more people with low skills.

The high-tech market is experiencing significant growth, and this has had a sharp impact on direct taxes. In 2020, there were many issues of Israeli companies, which put a lot of money into the state coffers. Tax revenues rise beyond the pre-crisis route. “However, it should be noted that the Treasury’s forecasts do not include a re-spread of the corona virus and do not assume that no new restrictions will apply to the economy.

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