Budget data for January-August 2019

September 15^th , 2019

 

Bottom line:

The budget data for August, as well as the data for the first eight months of 2019, confirm that Israel’s fiscal situation is deteriorating. The less-bad news is that the deterioration seems to have stabilised, at least temporarily.  Spending seems to be fairly under control, but the rate of increase in revenues is slow and this is driving the deficit higher. All this is happening against a background of paralysis in fiscal policy, caused by the absence of an elected government and Knesset.

 

Specifics:

• The budget deficit for January-August, at NIS28.7bn, represents 71.4% of that originally planned (2bn) – but only 64.9% of the revised deficit (of NIS50bn), authorised in January 2019.
• The deficit/ GDP ratio in the twelve months through August was 3.8%, similar to the level for recent months and not far from the revised target of 3.6% for fiscal 2019.
• Spending by government ministries in January-August was 7.7% higher than in the same period of 2018, compared to a planned rate of increase of 5.1%.
• Within this total, defence spending actually fell, by 1.4%, compared to a planned increase of 1.7% — and high rates of increase in recent years.
• Expenditures of civilian ministries, by contrast, have been rising rapidly – collectively, by more than 10% over 2018, versus a planned rate of only 6%.
• The Treasury review notes that distribution of government expenditure this year will be different than last year, with a higher share in the first half. Nevertheless, December is traditionally the highest-spending, and hence highest-deficit, month of the year and it is unclear if this will change in 2019.
• Total government revenues in January-August were 1.5% higher than in the parallel period last year. Direct taxation revenues rose 2.6% and indirect tax receipts 1.7%.