The Israeli economy will grow by 2.6% in 2015, similar to the growth rate in 2014, said the Ministry of Finance on Thursday. The figure, which includes the effects ofexpected natural gas production, is lower than the medium-term potential, according to the ministry. The growth rate is expected to rise to 2.9% in 2016.
The aggregate labor market is expected to remain at close to full employment levels, with the labor force growing by 2.2% and 1.7% in 2015 and 2016, respectively; the unemployment rate for those years is expected to be5.1% comparedwith 5.9% in 2014. Wages are expected to continue their rise, and will be affected partially by renewals of public sector labor contracts and an increase in the minimum wage.
The Ministry of Finance said that according to an updated revenue forecast, the Israeli governmentwill collect some NIS 270.2 billion in taxes for 2015 not including the effect of the lowered VAT rate. In 2016, the state is expected to collect some NIS 280.7 billion in taxes, not including the effect of the lowered VAT rate and lowercorporate taxes.
State revenues from taxes and fees in 2015 and 2016 will rise by 5.1% and 3.5%, respectively, (not including one-time revenue and legislative changes) comparedwith the previous year.
If all of the planned changes are implemented, state revenues for 2015 and 2016 will rise to NIS 297.6 billion and NIS 312.3 billion, respectively.
The Ministry of Finance noted that the deficit target for 2015-16 would not change from 2.9%. It also mentioned the rise in the collection of direct taxes over the last two years, which reflect the improvement in the labor market and the continuing climb of the stock market. The large totalof tax collection over the summer months of July and August waspartly due toreal estate deals being brought forward ahead of the increase in purchasetax, which came into effect at the end of June.
Ministry of Finance Director General Shai Babad said: “Leaving the deficit target at its current level is a sign of our intention to continue to lower the debt-to-GDP ratio while working to spur the growth rate.”
Published by Globes [online], Israel business news - www.globes-online.com - on September 17, 2015
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