Israel's Treasury Predicts Smaller Budget Deficit for 2017 Than Originally Feared

Reasons cited for the change in shortfall include interest-rate stability, dip in development costs and virtual freeze on new spending commitments.

Finance Minister Moshe Kahlon speaks at a meeting in the city hall of Ma'alot, northern Israel, May 19, 2016.
Gil Eliahu

The budget shortfall next year is projected to be 14.1 billion shekels ($3.7 billion), the Finance Ministry said Monday, and also projected that in 2018 the budget hole will shrink to 8 billion shekels. There had been concern that the shortfall would be higher, but the fact that interest rates have not been raised, that development costs have gone down, and that new budgetary commitments have not been forthcoming has cut the size of the budget deficit..

The cabinet will hold a special meeting today to prepare for its budget for 2017 through 2019. This is being done as a result of the law, which requires the Finance Ministry to present its budget forecast for the following three years by June 1.

In the coming months, the cabinet will consider the provisions of a two-year budget covering 2017 and 2018. The budget will be based on the outcome of today’s cabinet meeting, although subsequent consideration of the budget itself will be more detailed.

The 2017 budget is based on the assumption that the economy will grow by 2.9% and that the deficit will be 2.5% of the country’s gross domestic product. There had been concern that the budget shortfall for 2017 would go as high as 19 billion shekels, but as preparations progressed, the ministry reduced its forecast to 14.1 billion shekels. The figure consists of 6 billion in defense spending, 4.5 billion in miscellaneous expenditures and 3.5 billion shekels in reserves for budgetary adjustments.