Yesterday the Minister of Finance presented the 2006-2007 economic plan. Presenting the plan in a press conference, the minister stressed the following points in his speech:

  • Throughout the entire period of the war, Israel did its utmost to protect the Israeli economy, acting in a responsible and sensitive manner to solve the problems that arose.
  • The main principle in the national budget will be the retention of a responsible fiscal policy.
  • The budget limits will not be exceeded and the rate of growth in spending will increase by 1.7%. Any incremental expenditure or any change in the defined orders of priority will have to be contained within the budget framework.
  • The Minister has decided to approve a one-time budgetary increment for replenishing the armed forces’ stockpiles and for reconstruction in the North. This increment, in the amount of NIS 3.5 billion for 2007, will be a closed item extraneous of the expenditure target.
  • Taxes will not be raised.
  • Social needs will be met in the 2007 budget by increasing the allotment for some social sectors, including the following: health basket ;- NIS 237 million, higher education NIS 100 million, children at risk NIS 200 million, day care centers NIS 70 million.

A decision was made to set up a team to examine the financial requirements of the defense network and the manner in which the defense budget is allocated.

The Ministry will continue to apply various structural reforms in the economy this year in order to make the Israeli economy more efficient and more competitive.

The Minister has also updated the economic figures for the years 2006-2007.

 

The Economic Program for 2007
Updated Figures – September 2006


Macro Data for 2006

Before/After the war in the north

Before

After

Growth rate (forecast)

5.3%

4.3%

Deficit

0.0%

1.5%-2%

Budget performance

98%

100%

Debt (as % of GDP)

89%

91%

Macro Data for 2007

Before

After

Growth rate

4.1%

3.8%

Debt

86%

89%

Deficit

2.0%

2.35%*

Deficit under an initial assumption  of a 1.7% increase in spending

* 2.9% following a one-time increase in spending

Costs of the war in the north – initial estimate*
NIS Billion

Property Tax – direct damage

1.0-1.5

Property Tax – indirect damage

3.5-4.5

One-time increment for the defense network

8.2

Increment for other matters (during the war)

0.3

Total direct costs to the State Treasury

13.0-14.5

*Not including the defense network’s additional costs

One-time increment – 2007
NIS billion

Strengthening the north

1.0

Increment for financing the costs of the war

2.5

Total

3.5