Israel's budget deficit deepens amid financial crisis
With Israelis set to return to the polls in March for an unprecedented third time in less than a year, the entity is now well into 2020 before a new budget is passed.
During a briefing to the Finance Committee of Knesset (parliament) on Monday, the Bank of Israel Governor Amir Yaron offered a gloomy economic outlook for the upcoming months.
Israel’s budget deficit is forecast to reach 3.3% of the gross domestic product (GDP) this year if no budget is passed in 2020, he said.
Due to a political stalemate following two inconclusive elections, Israeli lawmakers have yet to approve the annual budget for this year.
The Israeli economy has so far weathered two inconclusive ballots, but it cannot escape the impact of no budget.
The last permanent cabinet fell apart in late 2018 and Prime Minister Binyamin Netanyahu has since headed caretaker cabinets that have been unable to enact any major tax hikes or spending cuts needed to rein in the deficit.
The March election means it will likely be at least mid-year before a new budget can be put in place.
The ministry of finance said last month that the cumulative fiscal deficit for the past twelve months (from December 2018) stands at 3.7% of the GDP.
Israeli authorities promised to boost investments in public transport and competition in the workforce, but most plans have come to a standstill.
Contractors at the ministry of military affairs were already seeing payments being frozen, according to an industry source cited by Reuters.
In November last year, the Organization for Economic Cooperation and Development (OECD) cut its economic growth forecast for Israel to 2.9% in 2020 from a previous estimate of 3.3%, and forecast a similar rate in 2021.
The Bank of Israel has cut its key interest rate in recent months for the first time since 2015.
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