Left Menu
Development News Edition

Election turmoil plunges Israel into budget crisis


Election turmoil plunges Israel into budget crisis

With the prospect of a third election in Israel in less than a year, it will be well into 2020 before a new budget is passed, triggering months of cutbacks that will weigh on economic growth. The Israeli economy has so far weathered two inconclusive ballots and a year of successive caretaker governments that were restricted from making any big decisions, from tax reforms to court appointments.

But it cannot escape the impact of no budget. Government ministries will automatically revert to their 2019 monthly allocations without an increase, making it harder to commission new roads, pay contractors and cover a growing deficit. "Coping with it will not only affect government offices, but also the entire economy," the accountant general told a concerned parliamentary finance committee this week.

He offered the gloomy outlook as it became clear that neither Prime Minister Benjamin Netanyahu nor his rival, Benny Gantz, had enough support in parliament to form a government. With both politicians coming up short, there now begins a 21-day period in which Israeli lawmakers can nominate anyone of the Knesset's 120 lawmakers to try and establish a coalition.

If that fails too, an election is triggered within 90 days, raising the prospect for a weary electorate of going back to the polls after votes in April and September. "There is absolute chaos in all the government ministries. That's what happens when you don't have a budget. And if they really do announce elections - it becomes a nightmare," said Amir Fuchs, a legal expert at the Israel Democracy Institute.

Defense contractors are already seeing government payments being frozen, according to an industry source. New road and rail projects, critical to ease traffic congestion, are expected to be put on hold. "Purchases by ministries will all slow and some will even come to a halt," said Jonathan Katz, Leader Capital Markets' chief economist.

LOST OPPORTUNITIES Uncertainty aside, the shekel remains one of the strongest currencies in the world and economic growth was a robust 4.1% in the third quarter, initial estimates showed this week. But risks have grown over the past year.

Israel's budget deficit is projected to swell to close to 4% in 2019 from 2.9% in 2018, and new taxes and spending cuts are needed to rein it in before it impacts the country's credit rating. Government officials promised to boost investments in public transport and competition in the workforce to keep steam in the economy, but most plans have come to a standstill.

"The main issue is that of lost opportunities. More specifically, the opportunity to make much needed structural changes in the economy," said Bank Leumi chief economist Gil Bufman. The OECD on Thursday cut its economic growth forecast for Israel to 2.9% in 2020, from a previous estimate of 3.3%, and forecast a similar rate in 2021.

It blamed the global slowdown, but also noted that "intensifying structural reforms...is crucial to lower the large social disparities and boost productivity". The OECD also called for tax reform to increase revenue, something impossible without a government in place.

The Bank of Israel is expected to cut its key interest rate next week for the first time since 2015, with most economists polled by Reuters citing the global slowdown and an over-appreciation in the shekel.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)

Download The Devdiscourse News App for Latest News.


TRENDING

OPINION/BLOG/INTERVIEW

SDG13: How you can reduce global warming by changing your food habits

The mega narratives of various international organizations give the impression that fighting global warming is only a job of government agencies. However, the European Investment Bank EIB has designed a questionnaire which besides making th...

SDG2030: Challenges of technological applications in advancing Global Goals

Application of contemporary and future information technologies may go milestones in advancing sustainable development goals SDGs provided the challenges are overcome and implementation is ensured....

Sustainable Fashion: UNDP wants you to wear properly to reduce Global Warming 

The experts have estimated that the amount of water used to prepare one pair of jeans and a T shirt is sufficient for a person to drink for 13 years....

World Economic Forum suggests 8 Education Models for Future Schools

In a report released on January 14, the World Economic Forum WEF has also picked two examples for each model from throughout the world. The WEF has emphasized that these schools systems would be crucial for Forth Industrial Revolution.&#160...

Videos

Latest News

Packers add P Scott (illness) to injury report

The Green Bay Packers added punter JK Scott to the injury report for Sundays NFC Championship Game against the San Francisco 49ers due to an illness. Scott and fullback Danny Vitale knee are the only two Packers listed as questionable.A fif...

UPDATE 1-Dozens injured as security forces clash with protesters in Beirut

Dozens of people were wounded in Beirut on Saturday as security forces used tear gas and water cannons in clashes with protesters armed with tree branches and sign posts near Lebanons parliament.After a lull in largely peaceful protests whi...

Hardik Patel arrested for not appearing before trail court in sedition case

Congress leader Hardik Patel was arrested on Saturday for failing to appear before a trial court here in a sedition case.A non-bailable warrant was issued against Patel in the sedition case. He was arrested near Viramgam in Ahmedabad.DCP Ah...

UPDATE 2-U.N. envoy hopes for, but cannot predict, speedy reopening of Libya oil ports

The United Nations envoy to Libya said on Saturday he hoped but could not predict whether eastern oil ports shut ahead of a Berlin summit aimed at reaching a truce in Libya would be reopened soon. Oil export terminals across eastern and cen...

Give Feedback