'Israel' records first budget deficit following Moody's report
4 Min Read
The Israeli occupation's Finance Ministry announced that its government posted a budget deficit of $82 million this March after 9 months of continuous surpluses.
-
The Occupation's Finance Minister, Bezalel Smotrich talks to his Prime Minister Benjamin Netanyahu at a press conference at the Prime Minister's office in occupied Al-Quds, 25 January 2023 (Reuters)
The Israeli occupation's Finance Ministry announced on Sunday that its government recorded a budget deficit of $82 million in March.
The budget deficit is the first one recorded in nine months as tax revenues fell, according to preliminary data issued by the occupation's Finance Ministry.
The downward trend in revenues was preceded by an "exceptionally high increase in state revenues" received in 2022.
The Finance Ministry said the deficit is fueled by a downward trend in government revenues following the “exceptionally high increase in state revenues” in 2022. In March, the occupation government's earnings were cut down to $11.18 billion, which marks a 4.7% decrease in comparison to revenues of March 2022 which amounted to $11.73 billion.
Expenses also increased to $11.92 billion versus $11.48 billion in the same month last year.
The March deficit might seem negligible in overall GDP (0.01%); however, it coincides with an overall decrease in economic growth in 'Israel' which reached a 6% increase in 2022 and is now projected at 2.5%.
Moody's sends message to Netanyahu, lowers 'Israel' credit outlook
Moody's global risk assessment agency downgraded the Israeli occupation's economic outlook to "stable" on April 16 after it was "positive" amid several crises affecting the Israeli occupation.
Moody's said its sovereign credit rating for the Israeli occupation was A1, which made the decrease shocking, though many financial and economic experts had warned of the decision in light of the plight of crises facing the Israeli occupation.
"The change of outlook to stable from positive reflects a deterioration of Israel’s governance, as illustrated by the recent events around the government’s proposal for overhauling the country’s judiciary," the renowned firm wrote.
Moreover, it asserted that "the manner in which the government has attempted to implement a wide-ranging reform without seeking broad consensus points to a weakening of institutional strength and policy predictability. As a result, the risks on Israel’s rating are now balanced, leading to a stable outlook."
The statement stressed that "all in all, the recent events offset the positive developments that had led Moody’s to assign a positive outlook in April 2022, which related to strong economic and fiscal performance and the implementation of structural reforms by the previous government."
Declining economy
Senior officials from the occupation's Finance Ministry have cautioned that the proposed judicial reform by Netanyahu's government could cause a major loss of tax income which would result in "very significant harm" to the economy.
Revenues coming from direct taxes decreased by 8% to about $5.48 billion, while real estate taxes saw the biggest blow; they were cut down to $410 million which equates to a whopping 43% decrease.
Israeli Central Bureau of Statistics revealed that the housing market witnessed, for the first time since 2020, a slump in prices as home prices decreased by 0.2% between January and February 2023.
Furthermore, corporate taxes decreased by 6% and revenue from the collection of value-added taxes was cut by 20% which is partially the result of an overall slowdown in consumption.
This comes after the Israeli government posted a surplus, the first in 35 years, which amounted to $2.66 billion.
The occupation's Finance Ministry expects a 0.9% budget deficit in 2023 and 0.8% in 2024 of total GDP.
Netanyahu's government at risk
The Israeli 2023-2024 budget was approved by the Knesset in its first reading at the end of March. The budget proposal was transferred to Knesset's Finance Committee which is currently reviewing it.
The budget presented by the government allocates $132.81 billion in spending for 2023 and will increase to $140.73 billion in 2024.
The occupation's Prime Minister Benjamin Netanyahu could risk an automatic government dissolution unless his government is able to complete the 2 remaining budget votes by May 29. The current cabinet is facing substantial internal pressure as the proposed judicial reforms stirred up fierce opposition not to mention the Palestinian's daily acts of resistance which have become a substantial security risk for the occupation.
