"It is puzzling why the government's debt-to-GDP ratio has not been published," says Leader Capital Markets chief economist Yonatan Katz in his weekly review. He told "Globes", "The debt-to-GDP ratio is usually published two or three days after publishing the deficit figures."
He estimates that Israeli government's debt-to-GDP ratio rose from 72.7% in 2011 to 73.6% in 2012 (excluding the debts of local authorities), and that the public's debt-to-GDP ratio rose from 74.1% in 2011 to over 75% in 2012. Sources inform ''Globes'' that the Bank of Israel and leading financial institutions have similar figures.
The worrisome fact is not the substantial rise in the debt-to-GDP figure, but that the ratio has risen at all, belying the fiscal targets. Moreover, Israel's debt-to-GDP ratio should be lower than that of other OECD countries, given Israel's geopolitical risks, which are liable to materialize, such as Operation Pillar of Cloud in November 2012.
Katz says that the unplanned rise in the debt-to-GDP ratio was due to "the huge NIS 16 billion surplus capital raised". Market sources say that the large deficit did not necessarily have to be financed by raising debt, but that revenues from privatization and especially land sales plummeted in 2012, indicating a double failure by the government at both the fiscal level and in the housing market.
The publication of the deficit figure caused an outcry as it became clear that the government was responsible for the NIS 40 billion deficit in 2012, more than double the target.
The Ministry of Finance denies that it has calculated and delayed the debt-to-GDP ratio, claiming that key data are still missing, including the final GDP figures. But there are never final GDP figures in January. The ministry claims, "The debt-to-GDP ratio is continuing to fall. On the basis of updated estimates by the Accountant General, it can be said that the debt-to-GDP ratio for 2012 will be 73.5-74.1%, and will therefore be lower, or at worst, unchanged. The final figures will be published after the financial report for 2012 is signed."
Other economists believe otherwise. "What is most worrying is the breaking of the downward trend," a top economist told "Globes". He estimates that the debt-to-GDP ratio rose by more than one percentage point, after the ratio fell in the preceding decade, except during the recession in 2009.
The economist added, "IMF officials were here a few weeks ago, and they were very worried by the excessive deficit, and especially how to cut NIS 15 billion from the budget. They're beginning to believe that Israel's deficit is unrelated to the business cycle, but is structural, and they are very worried that there will be another deviation in 2013."
Published by Globes [online], Israel business news - www.globes-online.com - on January 20, 2013
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