"The economy managed to lower the ratio of public debt to GDP during the crisis, at a time when many countries increased their debt, thereby hampering their recovery from the economic crisis," Bank of Israel Research Department deputy director Dr. Michel Strawczynski said at a Round Table of the Falk Institute at the Hebrew University of Jerusalem on "The Priorities of Israel's Budget" yesterday.
Strawczynski added, "The strategy of maintaining a low deficit in the period preceding the crisis and the goal of a gradual reduction in the ratio of the public deficit to GDP after it, proved to be very successful."
Strawczynski cautioned, however, "The events taking place in Arab countries are liable to affect the existing geopolitical balance, although it is still too early to determine what kind of effect on the state budget the events will have in the long term."
In the short term, he said, "the events are likely to affect the development of defense spending in Israel, following a number of years in which defense spending rose by an annual average of NIS 2 billion. It should also be noted that actual spending in the defense budget exceeded the original budget in recent years."
Strawczynski asserted that it was important that every budget decision taken in the coming months, including those involving wage agreements, should take into account the decision’s expected effect on the government budget in the coming years, particularly starting in 2013. According to the Research Department’s forecasts, based on the decisions taken up until now, the deficit is expected to total 3% of GDP higher than the target of 1.5% of GDP set for that year. This estimate does not include the wage agreements with the secondary school teachers (signed yesterday) and with the doctors (which is presently in negotiation).
Published by Globes [online], Israel business news - www.globes-online.com - on May 30, 2011
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