Budget data for January-October 2019

November 10th, 2019
Bottom line:
Budget data for October were still slightly distorted by the impact of the Jewish holidays (Sep. 30 –Oct. 21) on tax collection and government spending. Nevertheless, ten months into the fiscal year, the general picture is very clear. The deficit has stabilised at the high level of 3.6-3.8% of GDP, thanks to government expenditure being contained at the levels determined in the adjusted 2019 budget. On the other hand, revenue growth is sluggish and looks to be weakening.

The immediate issue is whether December will see a surge in government spending, as usually happens towards the end of the fiscal year. More importantly, from January the absence of a functioning government will leave fiscal policy in a vacuum and make budget management very difficult.

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Budget data for January-September 2019

October 24th , 2019
Bottom line:
The budget data for September are significantly distorted – as is often the case — by the incidence of the Jewish holidays, which this year began on September 30 and continued through October 21.  As a result, both inflows of revenues and outflows of spending are distorted, but in different ways. Offsetting distortions will occur in October, and only by taking the two months together or, better, by focusing on the January-October data, can the underlying developments by identified.

The review of the monthly data by the Accountant-General’s division highlights these distortions and provides estimates of the undistorted data. The general conclusion arising is that the trends apparent throughout 2019 are still in force. The following are a few specific data points that are relevant, despite the distortions.

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September 16, 2019
Bottom line: April-June 2019 saw one of Israel’s largest-ever quarterly current account surpluses. This was achieved despite falls in the value of trade in both goods (smaller deficit) and services (smaller surplus), from the record levels posted in both of these in the first quarter of 2019. The key to the large surplus was the $600m surplus on primary income – highlighting the trend underway in this area in recent years, from deficit to surplus. I expect this to continue.

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Budget data for January-August 2019

September 15th , 2019
Bottom line:
The budget data for August, as well as the data for the first eight months of 2019, confirm that Israel’s fiscal situation is deteriorating. The less-bad news is that the deterioration seems to have stabilised, at least temporarily.  Spending seems to be fairly under control, but the rate of increase in revenues is slow and this is driving the deficit higher. All this is happening against a background of paralysis in fiscal policy, caused by the absence of an elected government and Knesset.

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March 10, 2019
Bottom line: The surplus in Israel’s current account for October-December 2018 jumped to $4.19bn, one of the highest-ever quarterly surpluses. But don’t get carried away by this good news. The rise was overwhelmingly due to a massive $1.14bn surplus on primary income (see definition below) – by far the largest-ever surplus on this component, which usually posts a deficit. It is doubtful if this can be repeated and it may even be revised down in the future. Other than that, the picture was mixed, but the $500m decline in the surplus on trade in services is a negative, especially for the fourth quarter when this surplus usually posts a strong rise.

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August 19, 2018
Bottom line: The economy is continuing to grow rapidly, driven by domestic consumption. However, the data for both Q1 and Q2 were massively distorted by sharp swings in vehicle imports — which soared in Q1 but slumped in Q2. More important is the ongoing decline in investment in residential construction and in new plant and equipment, other than vehicles. Export growth was sluggish, while import growth was strong — the external sector continues to be a drag on growth.

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