JERUSALEM (Reuters) – Israel’s budget deficit could reach as high as 14.5% of gross domestic product this year should the economy recover more slowly than expected from the coronavirus pandemic, a senior Finance Ministry official said on Tuesday.
Keren Turner-Eyal, the ministry’s director-general, told parliament’s economics committee that a base scenario shows the deficit reaching 13.3% of GDP in 2020, with the rise due to government spending to help businesses cope with the virus.
In 2021, the deficit would dip to 8.8% and in 2022 to 5.8%.
But should the economy recover slowly, the ministry projects a 14.5% deficit in 2020, 11.7% in 2021 and 8.3% in 2022, Turner-Eyal said. The deficit last year was 3.7% of GDP.
The debt-to-GDP ratio – which was 60% in 2019 – looks to reach 75% this year, or 78% in a more pessimistic scenario, she added, with the ratio growing to 84% or 96% by 2023.
Due to nearly two years of a political stalemate and infighting, Israel does not have a 2020 budget so it is using a pro-rated version of the 2019 base budget. It is not clear if and when a 2021 budget will be passed.
Separately, Finance Minister Israel Katz said he was seeking to boost a fund that provides government-guaranteed loans to small and mid-sized businesses by 18 billion shekels ($5.3 billion) to a total of 40 billion.
COVID-19 infections have surged in Israel and threaten to slow the economic recovery.
Bank of Israel Deputy Governor Andrew Abir told Reuters that the absence of a budget and a surge in COVID-19 cases meant the risk that growth and unemployment will develop in line with the central bank’s “pessimistic” scenario has risen.
That would mean a 7% economic contraction this year.
Reporting by Steven Scheer; Editing by Angus MacSwan