The decline in Israel's debt:GDP ratio will come to a halt in 2017 after continuing uninterruptedly every year since 2006, economists with whom "Globes" spoke said yesterday. They said that the process of decline in the debt ratio, one of the government's main economic achievements, exhausted itself in 2016, and that 2017 would see a reversal of the trend, unless growth figures were surprisingly good.
Ministry of Finance Accountant General Michal Abadi-Boiangiu released an initial estimate yesterday of the ratio of public and government debt to GDP for 2016. According to the estimate, the ratio of public debt, including local authority debt, to GDP fell to 62.1%. Excluding the local authorities, the ratio of government debt to GDP was 60.5%, which compares with 62.4% in 2015, representing a fall of 1.9%.
Minister of Finance Moshe Kahlon called the figures "an achievement for the Israeli economy, for the citizens of Israel, and especially for future generations."
The fall in the debt ratio was sharper than expected because of the revision of quarterly economic growth figures by the Central Bureau of Statistics. According to the initial estimate released by the Central Bureau of Statistics at the end of last month, in 2016 as a whole the Israeli economy grew by 3.8%. In nominal terms (in which the debt is measured) growth was higher, at 5%.
The Ministry of Finance says that the other main factors that contributed to the fall in the debt ratio were the low fiscal deficit, and market factors such as the fall in the Consumer Price Index, the strengthening of the shekel against the US dollar and the euro, and the continuing decline in the accumulated interest on the government debt, a result of efficient management of the debt by the Accountant General and her staff.
The debt:GDP ratio is a main indicator of Israel's financial strength and in the setting of Israel's credit rating. The final figures on the debt ratio will be published in a few months' time.
A comparative study by the Accountant General's Department finds that Israel's success in reducing its debt:GDP ratio stands out internationally. In the period 2015-2016, Israel's debt:GDP ratio fell by 1.8%, more than in any other country after Germany and Slovenia. Since 2007, Israel has managed to cut its debt:GDP ratio by 11%, more than any other developed country besides Norway.
The estimate that the process of a declining debt:GDP ratio in Israel has come to an end is based on the assumption that the Israeli economy will not grow by more than the growth target in the budget of 2.9%, and that the ratio of the fiscal deficit to GDP will not be lower than the target, which is also 2.9%. In 2016, the fiscal deficit was 2.13% of GDP, which compares with a target of 2.9%.
Published by Globes [online], Israel business news - www.globes-online.com - on January 23, 2017
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