2015 Drop in debt-to-GDP Ratio a Boost for Israeli Economy

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Israeli Finance Minister Moshe Kahlon briefing reporters at the Knesset on Monday.
Finance Minister Kahlon briefing reporters at the Knesset on Monday.Credit: Lior Mizrahi

Israel’s debt-to-GDP ratio decreased in 2015, in what Finance Minister Moshe Kahlon called a coup for the country’s economy.

The ratio of public debt to GDP dropped by 1.8% in 2015, to 64.9%, down from 66.7% at the end of 2014. The ratio of government debt to GDP decreased 2.1%, from 65.5% at the end of 2014 to 63.4% as of the end of last year.

These are initial estimates released by the Finance Ministry’s accountant general. The final figure will be published in March.

Public debt includes debt owed by the government, local authorities, the Jewish Agency and public nonprofits.

The debt-to-GDP ratio is one of the main macroeconomic indicators regarding a country’s economic wellbeing, and one of the factors used to determine a country’s credit rating. A decline in the ratio indicates an economy is stable.

The main factors impacting Israel’s debt-to-GDP ratio last year were the small budget deficit – 2.15% of GDP; the country’s rate of economic growth; the consumer price index; the interest on the country’s debt; and the dollar- and euro-shekel exchange rates.

This is the first time the accountant general’s office has published an estimate for these figures so close to the end of the year. This was made possible due to improvements in the departments dealing with debt and financing.

Israel’s debt-to-GDP ratio has been declining for years now, but is still higher than countries considered comparable to Israel by international credit rating organizations. These countries include Slovakia, Slovenia, Poland, Chile and South Korea, with a debt ratio hovering around 47%.

Kahlon called the new figures “an accomplishment for Israel’s economy,” and called them the result of responsible financial management.

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