Bank of Israel Research Department deputy director Dr. Michel Strawczynski warns that Israel's public debt will continue to rise, reaching a record 109.4% of GDP. Israel's public debt is projected to rise by 4.2%, or NIS 21 billion, in 2002-04.
At a Maurice Falk Institute for Economic Research in Israel conference at Hebrew University of Jerusalem today, Strawczynski said the government ought to meet its deficit target of 4% of GDP for 2004 and 3% of GDP for 2005.
Strawczynski said the government should carefully consider whether its new tax cutting proposals conformed to the new deficit targets.
Strawczynski said the continuing loss of tax revenues, due to the ongoing recession, had caused the tax rate to rise by 0.7% of GDP in 2002-03. The planned tax cuts in 2004 are projected to reduce the tax rate by only 0.3%.
Strawczynski added that for the first time since 1985, public spending, excluding interest payments, is expected to fall by 3% in real terms, after rising by more than 5% a year in 1999-2002.
Strawczynski criticized the government decision to make a uniform cut in various budget items. He said a uniform cut meant there was no clear setting of priorities between various budget items.
Published by Globes [online] - www.globes.co.il - on December 23, 2003