Israeli Fiscal Changes Will Slow Growth, Central Bank Says

Proposed tax increases and spending cuts will slow Israel’s economic growth next year, and further tax rises might be necessary beginning in 2015 if output doesn’t pick up significantly, the Bank of Israel said today.

The reduced spending and higher taxes will moderate growth by 0.7 percentage point in 2014, the central bank predicted in an e-mailed statement. Unless growth is “especially” rapid, taxes will have to be raised further to meet budget deficit targets in 2015 and 2016, the report said.

The Organisation for Economic Development forecast last month that Israeli growth, excluding new gas output, would slow to 2.7 percent in 2014 on fiscal tightening.

Prime Minister Benjamin Netanyahu’s Cabinet voted last month to reduce planned spending and raise taxes to meet deficit targets of 4.65 percent of gross domestic product this year and 3 percent in 2014. Finance Minister Yair Lapid said May 7 on his Facebook page that within two years, the economy will improve.

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