"We won't meet our deficit target. This will be a challenging year," Minister of Finance Yuval Steinitz told the Knesset Finance Committee today in a briefing on 2011 and the Ministry of Finance's forecasts for 2012. The ministry cut its 2012 GDP growth forecast to 3.2% from 4%.
"2011 was the second straight year of rapid growth - 4.8%," said Steinitz. "This growth was mainly based on the impressive increase in new investment in the economy, compared with all other countries, whose growth is based more on consumption and exports."
Steinitz updated the Finance Committee that the ministry had cut its tax revenues estimate for 2012 to NIS 221 billion from NIS 232.3 billion. Tax revenues totaled NIS 211.3 billion in 2011; the 2012 forecast implies 4.6% growth in taxes.
The Ministry of Finance has raised its budget deficit estimate for 2012 to 3.4% from the 2% set in the biennial budget written in 2010. The main reason for the higher deficit forecast is an NIS 11 billion shortfall in tax revenues compared with the budget plan.
Bank of Israel predicts 2.8% GDP growth
Just three weeks ago, the Bank of Israel revised its macroeconomic forecasts for 2012. It cut its GDP growth from 3.2% to 2.8%, down from the 4.8% growth in 2011. The central bank cited the global economic slowdown for the downward revision.
The Bank of Israel also predicts that the unemployment rate will rise from 5.6% in the third quarter of 2011 to 6.4% in the fourth quarter of 2012, and that participation in the labor force will edge up to 57.6%.
Published by Globes [online], Israel business news - www.globes-online.com - on January 18, 2012
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