Remarks by the Director of Research Department at the cabinet meeting on revising the budget plan for the years 2020–2022
Ministry of Finance suggusted to stop the use of the “adjustment reserve for maintaining fiscal stability”, which will lower the expected deficit to 3.5 percent of GDP. However, this level also exceeds the deficit target for 2019, which is 2.9 percent of GDP—a deficit level at which the debt to GDP ratio is expected to increase, or at the very least not decline. In view of the expected deficit level, it is important that the current government avoid making any decisions that will increase the deficit any further this year.
In addition, and as outlined in the Fiscal Survey published by the Bank of Israel in August, and in the three-year forecast (numerator) that was presented at the cabinet meeting, it is expected that there will be marked deviations from the budget targets for 2020–2022. This makes it even more necessary to avoid deficit-expanding measures until the formation of the new government, in relation to the years following 2019 as well.
The Bank of Israel recommends that when the new government takes office after the elections, it should immediately decide to adopt the measures required to converge to the multi-year deficit path upon which the government has previously decided, which will ensure a moderate and continued decline of the debt-to-GDP ratio.