Treasury sees Israeli economy picking up

Yoel Naveh
Yoel Naveh

Operation Protective Edge will have only a brief impact, the Finance Ministry chief economist predicts.

The Israeli economy will grow by 2.4% this year, despite Operation Protective Edge, and by 2.8% in 2015, the Ministry of Finance chief economist predicts. The ministry expects that, as a consequence of Operation Protective Edge, and particularly its impact on incoming tourism, economic growth will be zero in the third quarter, but that there will be a correction in the fourth quarter, with higher growth than currently forecast. The Ministry of Finance assesses the slowdown in the second quarter to have been temporary, and that the effect of Operation Protective Edge will be fleeting. According to a Ministry of Finance source, "the economy is not far from realizing its growth potential."

On the eve of Operation Protective Edge, Ministry of Finance chief economist Yoel Naveh forecast that the Israeli economy would grow by 2.9% in 2014 and by 3% in 2015. He presented these estimates to the social-economic cabinet in June. Yesterday evening, Naveh presented updated forecasts for economic growth, as well as the tax collection forecast, as part of the budget proposal presented to the prime minister.

The tax collection forecast for 2015 predicts revenues of NIS 256.6 billion, at 2014 prices. This represents growth of only NIS 4.7 billion over tax collection this year, which is expected to total NIS 251.9 billion. In percentage terms, tax collection growth in 2015 is expected to be just 1.8%, well below the expected GDP growth rate. The Ministry of Finance explains the discrepancy by the fact that tax collection in 2014 has been higher than forecast because of one-time receipts from several large deals involving the sale of control in companies.

The Ministry of Finance's growth forecast for 2015 is to a large extent based on the International Monetary Fund's forecast for growth in global trade in 2015, which is 5.2%, and for 3% growth in the US economy. This year, growth in international trade has been lower than expected because of weaker than expected recovery in Europe.

Published by Globes [online], Israel business news - www.globes-online.com - on September 15, 2014

© Copyright of Globes Publisher Itonut (1983) Ltd. 2014

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