Israel’s debt-to-GDP ratio fell at a faster rate than the Treasury thought

by time news
Israel’s debt-to-GDP ratio fell at a faster rate than the Treasury thought

The public-debt-to-GDP ratio of the State of Israel shrank to 208.8% in 2021, compared with 71.7% in 2020, the Accountant General of the Ministry of Finance, Yahli Rotenberg, announced this morning (Tuesday). This is a better figure than the initial estimate of the Treasury published in January, according to which the debt-to-GDP ratio fell to 70.3%.

Despite the decline in debt as a percentage of GDP, in absolute numbers the national debt broke the NIS 1 trillion ceiling in 2021. The debt, which has accumulated the state’s deficits, stood at NIS 1,044 billion at the end of last year, compared to NIS 984 billion in 2020.

Throughout the decade preceding Corona, the public debt-to-GDP ratio fell by about 11% and has already reached a rate of 59.5%. This level was historically low and allowed fiscal flexibility for the government in dealing with the corona crisis during 2020. But government spending on the corona – compensation, unemployment benefits and grants – along with the slowdown in growth, boosted the debt-to-GDP ratio.

According to the Treasury, in 2021 the government’s financing needs were lower than forecast mainly due to the economy’s rapid recovery from the corona crisis, with an emphasis on tax revenues. The volume of interest expenses in respect of government debt in 2021 was about NIS 40.9 billion, compared with about NIS 38 billion in 2020. Despite the increase in total nominal interest expenses, the downward trend in interest expenses in relation to debt and GDP continued. The rate of interest expenses in relation to debt decreased to a level of about 3.9% in 2021 from a rate of about 4.1% in 2020.

Ksal Rotenberg explained the data as follows: “2021 was characterized by a rapid recovery of the economy from the corona crisis and an increase in government revenues above early forecasts, which led to a significant decline in government deficit and a fall in the public debt-to-GDP ratio from 71.7% in 2020, to 208 of 68.8. “The expression of confidence in the Israeli economy is reflected in the recent reports of the credit rating companies and in the updating of Israel’s credit rating to ‘positive’ by Moods.”

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