Speaking of the economic fallout, Bank of Israel Governor, Amir Yaron, has warned that, the country’s annual budget deficit may reach 13 percent of GDP by the end of the year 2020.
According to a report issued by the Ministry of Finance earlier in July, Israel’s annual budget deficit recently reached a record 88.4 billion new shekels (25.6 billion U.S. dollars). The report added that the deficit figure, between July, 2019 and June, 2020, accounted for 6.4 percent of Israel’s GDP. It has been way above the government target of three percent.
Per the statement issued by Israel’s central bank, on July 12, the Bank of Israel Governor spoke at a meeting and referred to the expansion of the government new plan, to support business owners and self-employed during the crisis.
Following the expansion of the plan, the Governor estimated that the budget deficit would increase accordingly. Amir Yaron noted that the potential budgetary cost of expanding the plan is about 15 billion shekels in 2020, and about 27 billion shekels in 2021.
He further estimated that in 2021, the deficit will be cut by almost half, compared to his 13 percent 2020 forecast, reaching seven percent of GDP.
However, Amir Yaron added that the government can successfully finance the plan, “as the trust of the financial markets in the Israeli economy will help the country overcome the crisis in terms of the financing requirements.”