Bloomberg News

Israel Finance Ministry Says Growth May Slow to 4% in 2012

October 31, 2011

(Updates with analyst comment in fifth paragraph, revenue figures in sixth.)

Oct. 31 (Bloomberg) -- Israel’s Finance Ministry said economic growth will slow to about 4 percent next year as an expansion in exports eases.

“We are looking ahead to 2012 and see worrying signs,” Finance Minister Yuval Steinitz said today, speaking at a hearing of the Knesset Finance Committee in Jerusalem. “We see black clouds gathering around us and we haven’t yet reached safe shores.”

Growth will be about 4.8 percent in 2011, Steinitz said, adding that revenue will probably be below the Finance Ministry’s earlier forecasts for both 2011 and 2012. The government budget deficit next year is forecast at 2.6 percent of gross domestic product, compared with a planned deficit of 2 percent, ministry officials said.

The Bank of Israel on Sept. 22 cut its forecast for economic growth to 4.7 percent this year and 3.2 percent in 2012, from previous estimates of 4.8 percent and 3.9 percent. Bank of Israel Governor Stanley Fischer cut the benchmark interest rate for the first time in more than two years at the end of September, citing a “negative turnaround” in the global economy and weakness in Israeli exports.

“I think the investment community is probably lower than that Ministry of Finance estimate,” Michael Klahr, an equity analyst at Citigroup Inc. said of the 2012 forecast in a Bloomberg Television interview. “We’re very focused on international growth, but also on domestic demand, and we’ve seen a weakening of both over the last three or four months.”

Revenue Forecasts

Revenue this year is likely to be 212.5 billion shekels, compared with a planned 213.5 billion shekels, according to a Finance Ministry forecast approved by the Cabinet on Oct. 3 and presented to the Knesset Finance Committee today. Revenue in 2012 is forecast at 227 billion shekels, down by about 5 billion shekels from the official budget target.

Revenue for both years is likely to be even lower than the updated figures, Steinitz said.

The TA-25 benchmark stock index fell 1.1 percent at 4 p.m. in Tel Aviv. It has declined 16 percent this year in dollar terms, more than four times the drop on the MSCI World Index.

--Editors: Louis Meixler, Karl Maier, Ben Holland.

To contact the reporters on this story: Alisa Odenheimer in Jerusalem at; Jonathan Ferziger in Tel Aviv at

To contact the editor responsible for this story: Louis Meixler at

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