Debt-GDP Ratio Hits Record Low

The national debt fell at the end of 2006 to only 86 percent of GDP - its lowest rate in Israeli history. This is another important success for the economy, especially when compared to the 95 percent level at the end of 2005.

The low debt ratio is quite a pleasant surprise since previous estimates - including those given to the international ratings agencies - forecast an 88 percent rate.

The low debt ratio increases the chance that Israel's ratings will rise further.

Moreover, the accountant general's division is forecasting an 82-83 percent level at the end of 2007. Such a number is nearing the levels of OECD nations: 78 percent on average.

However, the comparison is not quite accurate. Israeli numbers do not include the debts of local authorities, while those of other Western countries do. Such a calculation would increase Israel's debt level by some 2 percent.

The European Union has set 60 percent as its target number for members, though Italy has a ratio of 120 percent of debt to GDP and Belgium 98 percent.

The reason for the drop is not only due to rapid economic growth, and because of increased revenues from privatization. Low inflation and a strong shekel, as well as a small government deficit, all contributed.

Similar factors are expected to influence the numbers in 2007, too.