The trend of increasing the deficit continues: the cumulative deficit over the past 12 months ending in May was about NIS 11 billion, or 0.6 percent of GDP, an increase from the level of 0.3 percent recorded in April. This was reported today by the Accountant General's Department in the Ministry of Finance.
The monthly deficit was about NIS 4.4 billion compared with May of last year, which ended with a surplus of about NIS 1.3 billion. The Finance Ministry's report also shows that since the beginning of the year, there has been a cumulative surplus of about NIS 13 billion.
In May, revenues totaled NIS 36.4 billion, and state revenues since the beginning of the year totaled NIS 198 billion, compared with NIS 206 billion in the corresponding period last year – a cumulative decrease of about 4.2%. The widening of the deficit derives mainly from a decrease in state tax revenues and an increase in government spending.
Campaign at the Ministry of Finance. Minister Smotrich. Economic Right, When Convenient (Archive), Photo: Oren Ben Hakon
Expenditures in May were about NIS 41 billion. Government expenditure since the beginning of the year stood at about NIS 184.7 billion, compared with NIS 173 billion in the corresponding period last year – a cumulative increase of about 6.8%.
The Ministry of Finance also notes that this month the state budget for 2023-2024 was approved, and that this approval enables an increase in budget execution in 2023 relative to the interim budget by more than NIS 25 billion, which is already reflected in an increase in expenditures in May.
Tax revenues decline
In May 2023, state tax revenues totaled NIS 34.9 billion. At uniform tax rates, state tax revenues declined in May 2023, in real terms, by 10% compared to May 2022. Collection from direct taxes declined by 11 percent compared with last year, collection from indirect taxes declined by 9 percent, and collection from fees increased by 20 percent.
Significant reduction in real estate activity, photo: Yossi Zeliger
The decline in direct tax revenues derived from a decline in all revenue items, but mainly in real estate tax revenues and an increase in tax returns. The decline in indirect tax revenues is also partly explained by a reduction in activity in the real estate market. It should be noted that revenues in May 2022 were relatively high.
Smotrich: "We have a security reserve, we have a safety cushion"
Two weeks ago, the morning after the budget was approved, Finance Minister Bezalel Smotrich addressed the budget deficit that is expected to increase due to the slowdown in the economy and in accordance with the forecasts of the chief economist in his ministry, saying: "Our normal deficit target is 2.5 percent. We are in a period of global uncertainty, and this may actually be a very big opportunity for the Israeli market."
"We have a security reserve, we have a safety cushion. Even if I have a decline in state revenues of NIS 30-40 billion in 2024, we still won't cross the 2-2.5% deficit line. There will be no tax increase, maybe even the opposite."
Forer: "Netanyahu and Smotrich are crushing Israel"
Former Minister of Agriculture and Chairman of Yisrael Beiteinu MK Oded Forer responded to the report on the surge in the deficit and the decline in tax revenues: "Netanyahu and Smotrich are crushing Israel. They received NIS 10 billion in surplus and low unemployment. But they made sure to pass a sectoral budget, shut down the market and encouraged unemployment, poverty and ignorance."
MK Oded Forer, Photo: Oren Ben Hakon
"In economics, the numbers talk. Bibi failed and Smotrich collapsed. The citizens of Israel are now beginning to feel the flight of high-tech investors and the warnings of economists, the OECD and many other international bodies. The best thing they can do right now for the economy is resign."
Wrong? We'll fix it! If you find a mistake in the article, please share with us