Bloomberg News

Israel Posts September Budget Deficit as Tax Revenue Falls

October 06, 2011

(Updates with tax figures in second paragraph, economist comment in third.)

Oct. 6 (Bloomberg) -- Israel posted a budget deficit of 1.6 billion shekels ($430 million) in September as tax revenue fell.

Direct taxes, which have shown a “declining trend” since June, were down 2 percent compared with the same month last year, the Finance Ministry said in an e-mailed statement. While direct taxes have not fallen short of their estimate for the first nine months, there is a 1.2 billion shekel shortfall in overall revenue, it said.

The tax collection data was “disappointing,” said Modi Shafrir, chief economist at Tel Aviv-based I.L.S. Brokers Ltd. “This is an additional indication that the labor market may be softening and that growth may be slowing.”

Bank of Israel Governor Stanley Fischer, who had been raising rates for more than two years to battle inflation, reversed policy on Sept. 26 and cut the key rate by a quarter percentage point to 3 percent, citing the worsening global economic outlook. The bank is forecasting that growth will slow to 3.2 percent in 2012, compared with a Central Bureau of Statistics estimate of 5 percent growth for 2011.

The September figures brought the deficit for the first nine months of the year to 9.7 billion shekels, compared with 14 billion shekels during the same period last year, the ministry said. The 12-month budget deficit, which had been declining since the beginning of the year, reversed trend and rose in September, it said.

--Editors: Louis Meixler, Heather Langan.

To contact the reporter on this story: Alisa Odenheimer in Jerusalem at aodenheimer@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net.


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