Budget data for January-October 2019

November 10^th, 2019

 

Bottom line:

Budget data for October were still slightly distorted by the impact of the Jewish holidays (Sep. 30 –Oct. 21) on tax collection and government spending. Nevertheless, ten months into the fiscal year, the general picture is very clear. The deficit has stabilised at the high level of 3.6-3.8% of GDP, thanks to government expenditure being contained at the levels determined in the adjusted 2019 budget. On the other hand, revenue growth is sluggish and looks to be weakening.

The immediate issue is whether December will see a surge in government spending, as usually happens towards the end of the fiscal year. More importantly, from January the absence of a functioning government will leave fiscal policy in a vacuum and make budget management very difficult.

 

Specifics:

• The cumulative deficit for January-October 2019, at NIS37.6bn (NIS35.4bn after adjustments for seasonal distortions) is some 50% larger than the deficit in the same period of 2018.
• For the 12 months ending in October, the deficit/ GDP ratio was 3.7%, in line with the revised target for 2019 of 3.6%.
• A clear divergence is developing between expenditure and revenue. The level of expenditure, in terms of GDP, has been stable in a narrow range of 28.5-28.9% throughout 2019.
• However, revenue, as a percentage of GDP has been trending lower and, in October, fell below 25% — for the first time since 2016, when the expenditure/GDP ratio was much lower.
• Spending by government ministries in January-October rose by 6.5% over the same period in 2018 – thanks to defence spending, which actually fell by 0.8% so far this year. The rate of increase in civilian ministries was 8.5%.
• Total revenues rose by 1.8% in January-October. Revenues from direct taxes gained 4% and from indirect taxes 2.3%.