Treasury Revising Growth Outlook Down

The 2012 forecast, which now sees gross domestic product expanding 3.2%, will be revised to 2.9%.

Ahead of the cabinet's deliberations on the budget for 2013, the Finance Ministry is about to deliver bad news, in the form revising its growth forecast downward for this year and next.

At present the Finance Ministry projects 3.2% GDP growth this year. It's about to lower that projection to 2.9%, officials say. For 2013, the ministry economists are planning to cut their outlook to 3.3% from 3.7%.

Officials have already warned Prime Minister Benjamin Netanyahu about the pending forecast cuts.

Bank Hapoalim is even more pessimistic, foreseeing GDP expansion of just 2.5% in 2013.

The cabinet will be holding the first of three budget discussions this Wednesday. The main purpose of the first discussion is to set a five-year defense budget, for 2013 to 2017.

A second meeting will be held September 2 and a final one on the 13th. The revised growth forecast will be officially presented at the second meeting.

The Central Bureau of Statistics recently revised its figure for first-quarter GDP growth to just 2.7%. It was this revision that apparently convinced treasury officials that they needed to lower their estimates for tax collection, which play a critical role in the budget-making process.

While the ministry is predicting faster growth next year than this year, its prediction assumes that there will be no escalation of the situation in Europe, which could happen for instance if Greece exits the euro bloc.