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The Israeli Economy January 2012

Ministry of Finance. The Israeli Economy January 2012. Main Economic Indicators. Main Economic Indicators. Strong and sustainable GDP growth Labor market Moderate levels of inflation Eight years of consecutive surplus in the current account. GDP Growth Percentage Per Annum.

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The Israeli Economy January 2012

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  1. Ministry of Finance The Israeli Economy January 2012

  2. Main Economic Indicators

  3. Main Economic Indicators • Strong and sustainable GDP growth • Labor market • Moderate levels of inflation • Eight years of consecutive surplus in the current account

  4. GDP Growth Percentage Per Annum *Budget Estimate was 4.0% Source: Central Bureau of Statistics, Ministry of finance

  5. Unemployment and Participation Rates Unemployment rate (left axis) Participation rate (right axis) 57.3% Source: CBS

  6. Inflation is Under Control Year-End Inflation Rate Central Bank’s Key Interest Rate Today = 2.75% Source: Bank of Israel

  7. Balance of Payments - The Current AccountUS$ Billions & As Percent of GDP Source: CBS. * First three quarters annualized

  8. Fiscal Policy

  9. Expenditure growth is derived from two elements: Distance from debt target Permanent long term growth The New Fiscal Rule 60% * Average Growth Rate of 10 Years Expenditure growth rate= Debt/GDP ratio • No change in the deficit ceiling • One always functions as the effective limitation

  10. General Government ExpenditureAs a percentage of the GDP Source: CBS, The Ministry of Finance

  11. General Government ExpenditureAs a percentage of the GDP, International comparison 2010 * Weighted average; Source: OECD

  12. Tax Burden of the General Government2009 % of GDP Source: OECD, Ministry of Finance

  13. Public DebtAs a percentage of the GDP *Estimated Figures for 2011 Source: The Ministry of Finance

  14. Public Debt Increase Between the years 2007-2010As a Percentage of the GDP , International comparison Maastricht: 60% Debt Source: OECD Outlook 90, Israel 2010 - MOF

  15. Central Government's Budget DeficitAs a Percentage of the GDP,actual and according to the scheme Latest Forecast ** Fiscal rule limitation was 3% in 2008 * According to the Deficit Reduction and Budgetary Expenditure Limitation law 1992Source: CBS, the Ministry of Finance

  16. Key Economic Policies • Fiscal Responsibility – According to the Fiscal Rule • Encouraging Growth by: • Structural Reforms - Advancing Competitiveness • Active Labor Market Policies • Reducing Bureaucracy • Automatic Stabilizers

  17. Committee for Social and Economic Reform(Trachtenberg Committee) • Tax policy • Cost of living and competitive markets • Priority changes within the expenditure limitation • Housing and real-estate market

  18. Tax policyLegislation has been completed • Cancelling the direct tax reduction scheme (Individual and Corporate) • Raising maximum marginal tax from 44% to 48% • Lowering income tax for incomes between 8-14 thousand NIS a month (from 23% to 21%) • Raising corporate tax from 23% to 25% • Raising capital gains tax from 20% to 25% • VAT will remain 16% • Reducing duty free cigarette allowance • Introducing Tax allowance for fathers • Cancelling the rise in fuel taxes • Increasing negative income tax for women

  19. Thank You !

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