Israel will see slower economic growth in 2019 than it expected, the Treasury reported Tuesday. The Treasury is projecting growth of 3.1% compared to the 3.4% it predicted in June 2018.
As a result, the Finance Ministry plans to ask that the government not tap into the special reserve of 1.5 billion shekels ($410 million) it had put aside for use in 2019.
Even when the untouched reserve funds are factored in, the Treasury is still expecting that the nation's deficit will exceed the previous target rate of 2.9% to reach 3.5%, or 50 billion shekels ($14 billion) in monetary terms.
For now, the Treasury does not plan to ask the cabinet to approve cuts or tax hikes. Plans to that effect will be presented to the next government, which will be established only after the general election on April 9. The revised growth projections will go hand with a drop of some 4.7 billion shekels ($1.3 billion) in income from taxes and government fees.
Meanwhile, government expenditures are expected to exceed budget projections, partly because the Finance Ministry is transferring more money to the National Insurance Institute and spending more on welfare and benefits for Holocaust survivors.
According to figures from Finance Ministry Chief Economist Shira Greenberg, the gap between revenue and expenditure is bigger by 9.8 billion shekels ($2.7 billion) than what the original 2019 budget provided for. The general assessment was that government revenue from taxes and fees would from 306 billion shekels ($83 billion) in 2018 to 318.4 billion shekels ($86.38 billion) in 2019 – a figure that comprises an additional 12 billion shekels ($3.3 billion) in revenue compared to 2018, but is still 4.7 billion shekels ($1.3 billion) lower than the projected additional revenue when the 2019 state budget was approved.
Meanwhile, Finance Ministry Director General Shai Babad, speaking Tuesday at a conference at the Israeli Institute for Energy and Environment, said the government was in advanced negotiations with "one of the biggest companies in the world" to invest in Israeli high-tech.
"The investments would be of enormous significance for the Israeli GDP," he said.
Babad also touched on changes in the Israeli energy market.
"We were dependent on the Tamar natural gas reserve, and that's changing as other gas reserves come into play. We are moving from a coal-based electricity market to one that uses more natural gas, and the government is investing in incentives for renewable energies," Babad explained.
Babad said that reforms to the electricity market passed last year would result in close to 50% of the Israel Electric Corporation's electricity production would be transferred to private entities, which would allow the IEC to focus on supply. According to Babad, the reforms will increase the amount of available electricity, reduce the IEC's debt, and lower the cost of electricity.
Babad also noted that the Leviathan, Karish, and Tanin natural gas reserves would allow Israel full energy independence.
"We will publish more tenders for offshore [gas] searches. We'll produce electricity in a decentralized, more competitive manner and promote renewable energy. These are the right paths for the Israeli energy market," Babad said.
