The International Monetary Fund (IMF) on Wednesday said Finance Minister Bezalel Smotrich's estimations on Israel's deficit amid the war in Gaza weren't accurate. In an updated forecast revealed at the IMF's annual meeting in Washington, its economists predicted a significant budget deficit for Israel this year standing at about 9% of its GDP — and a 5.4% deficit in 2025.
Smotrich maintains that this year's deficit will be less than 7% of the country's GDP and won't exceed 4% next year. These are very significant differences: each 1% of the GDP amounts to about NIS 20 billion ($5.2 billion), meaning the IMF's projected budget deficit for this year is at least NIS 40 billion ($10.4 billion) higher than the Finance Ministry's estimates. According to IMF calculations, next year's budget deficit could reach NIS 110 billion ($28.6 billion).
The reason for such a significant deviation from the Finance Ministry's commitments (and those of the incumbent government once the 2025 budget is approved) lies on the side of revenue: IMF economists doubt the Israeli government's ability to implement all of the measures required to reduce the budget deficit to 4% of the GDP.
Therefore, the government will need to take on more debt. The ratio between public-government debt and the GDP is expected to rise to 69% this year (from 61.4% last year) and will continue to increase to 69.3% next year.
According to senior officials in the IMF's research division, all forecasts related to Israel's economy and government budgets are based on a scenario where "the war in the Middle East will subside no later than the first quarter of next year."
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Finance Minister Bezalel Smotrich and Prime Minister Benjamin Netanyahu
(Photo: Haim Tzach, GPO)
IMF officials on Tuesday called on the next U.S. administration to halt the massive increase in its debt, which is already approaching 125% of its output and negatively impacting the entire world.
The U.S. can do this, they said, as it is "in an excellent economic position that other developed countries can only envy." They declined to comment on the specific economic plans of the various candidates in the U.S. presidential race.
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