Accountant General Yali Rothenberg does not believe the debt:GDP ratio will reach 70% as it did during the Covid pandemic in 2020.
Until October 7, Israel’s Ministry of Finance expected the economy would end 2023 with a welcome fall of its debt:GDP ratio from 60.5% to 59.5%. But following the war, instead of a 1% fall, the ratio looks set to rise to 62.1%, according to the latest estimate by Accountant General Yali Rothenberg.
This would actually be better than the analysts’ predictions of 63%. But the end of 2023 figure would only reflect the initial damage of the war to Israel’s economy. The debt:GDP ratio is forecast to continue rising throughout 2024 and the big question bothering the markets and the ratings agency is how high will it go before it stops. In order for the debt:GDP ratio to stop falling the fiscal deficit, currently at 4.2%, needs to narrow to 3%, but according to the revised 2024 budget, it is set to widen to 6.6%. So any recovery is not expected before 2025, in the best case scenario.
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At the peak of the Covid pandemic, Israel’s debt:GDP ratio jumped from 58.8% in 2019 to 70.7% in 2020. But this time the Accountant General believes that the figure will not reach 70% before the trend is reversed.
Israel’s debt at the end of 2023 stood at NIS 1.12 trillion, up from NIS 1.03 trillion at the end of 2022 with most of the NIS 90 billion rise due to debt raised because of the war.
Published by Globes, Israel business news – en.globes.co.il – on January 18, 2024.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2024.
Yal Rothenberg credit: Oded Karney