Bank of Israel: Still no signs of economic slowdown - Haaretz

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Thu., February 07, 2008 Adar1 1, 5768

Israel Time: 02:09 (EST+7)

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Bank of Israel: Still no signs of economic slowdown

By Moti Bassok

Tags: economic growth

There's no sign of an economic recession for 2008, the Bank of Israel announced yesterday. Just the opposite, the central bank noted. All data is positive, and point to a high growth rate of 3.6% - 4.4% for the Israeli economy this year, more than forecasted for most developed countries.

The bank's survey of companies conducted in late December, which included 600 firms, also points to a positive first quarter for 2008. This conclusion is based on accumulated orders from overseas, and orders issued by the surveyed companies to foreign countries.

In addition, exports to the U.S., one of the economy's most important growth engines, have experienced no negative impact as yet. The Bank of Israel notes that U.S. orders from Israel, mostly high-tech firms, continue to flow in as usual.

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January registered a NIS 4.9 billion surplus from government activity. Government domestic activity produced a NIS 5.1 billion surplus, and a deficit of NIS 0.2 billion from foreign activity. By comparison, government activity last January registered a NIS 4.3 billion surplus.

The data published yesterday by the treasury's office of the comptroller general shows that the surplus from government activity was due to the fact that January revenues of NIS 19.2 billion exceeded expenditures of NIS 13.5 billion and credit of NIS 0.8 billion.

The January surplus was a result of high revenues from taxes as well as budget underspending. The treasury's budgets department created the 2008 budget based on the assumption that the year would conclude with a large budget deficit of NIS 11.45 billion (1.6% of the GDP).

Meanwhile, it looks like it will be quite a while before the state budget runs into a deficit. The treasury explained yesterday that January, the first month of the 2008 budgetary year, is generally a month of low government spending and high revenues. Government expenditures in January were lower than the treasury expected, just NIS 13.5 billion while ministry expenditures were NIS 11.4 billion. To compare, government and ministry spending totaled more than twice that figure, 27.2 billion and NIS 23.9 billion accordingly in December.

The treasury's announcement yesterday emphasized: "Spending in government ministries is seasonally low, and is not indicative of spending in coming months."

Nevertheless, Defense Ministry spending was as planned, NIS 4.3 billion, or 8.6% of its annual budget. Spending in social ministries (education, health and welfare), on the other hand, reached just NIS 4.7 billion, only 5.3% of their annual budget, far less than the expected 8.3%.

State revenues from taxes in January were very high, NIS 17.1 billion, although slightly lower (5.2% in adjusted terms) than last January, when they totaled NIS 17.4 billion, an all-time record for January tax revenues. The difference between this and last year is a result of one-time revenues in January 2007 of about NIS 1 billion generated by large companies as a result of Bachar reform.

Revenues from direct taxation (income tax and land taxes) total NIS 9.1 billion this year, compared to NIS 9.8 billion in January of last year, down 13.8%, but after deducting one-time revenues of NIS 1 billion, unchanged. Indirect taxes from customs and V.A.T. totaled NIS 7.6 billion last month, exceeding earlier forecasts from the Tax Authority, and 3.3% more than January of last year, which totaled NIS 7.1 billion.

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