Bank of Israel Governor Prof. Stanley Fisher on months, 26 Kislev 5773 announced the next government will have to cut the state budget by 15 billion NIS and increase taxes. Speaking to a Globe’s Economic Conference in Tel Aviv, Fisher pointed out the outgoing administration did not succeed in passing the state budget, leading to early elections. He expressed his realization that passing a new budget will not be a simple task for the incoming administration either, citing the treasury announced 4.2% annual deficit was too high and the 19th Knesset will have to address the current economic realities. He explained that the 4.2% figure is more than double the target number, adding the World Bank does a report on doing business in 85 countries and Israel has dropped in ranking from 32nd to 38th, “and that is not good”.

Fisher added the incoming administration will have to cut spending to the tune of 15 billion NIS, and most likely have to increase taxes despites the steps taken to date.

Globes:

Do the weaknesses in the Israeli economy mainly stem from external problems, or are they because of something happening in Israel?

Fisher:

A large part of the weakness certainly stems from the global economy, and exports are not growing the way they have grown in the past few years. Investment demand grew very rapidly in 2011 and in part of 2012, and there’s a significant slowdown. This means that people are less impressed with growth of 3%. That’s a potential source of difficulty, and there’s a degree of uncertainty in the geopolitical arena.

When asked if the current low rate of inflation will result in a drop in interest rates, Fisher indicated that if compelled to make such a move it will follow but it is not planned at the moment.

(YWN – Israel Desk, Jerusalem)