After a few months without a budget, Benjamin Netanyahu's coalition adopted, by 64 votes to 56, on May 23 and 24, the budgets for 2023 and 2024, as well as the scheduling law that supplements them. It is a continuity budget for infrastructure and the fight against the cost of living, and for strengthening Jewish identity in all state activities.
Budgetary expenditure for 2023, i.e. ILS 610.7 billion, including ILS 125.9 billion for debt repayment, is up 12.9%, supported by growth of 6.5% in 2022 and a forecast of 2. 5% from the IMF for 2023.
Thanks to tax revenue, public debt has fallen by 10 points of GDP in two years (60.9% at the end of 2022). After a budget surplus of 0.6 points of GDP in 2022 (due to good tax revenues), a deficit of 0.9% of GDP is expected in 2023 (based on an optimistic growth forecast of 3%) and 0.8% of GDP in 2024 (based on a growth rate of 3.2%). For the years 2025-27, the deficit would amount to 1.5% of GDP.
Expenditure for the development of public transport infrastructure will be maintained for around 36 billion ILS over 2023. This is just what the IMF considers necessary (1.8% of GDP) for Israel to be able to reduce its gap with the OECD countries. In particular, spending on road infrastructure will pick up again. With regard to transport, the planning law is in line with the continuity of previous governments: Israel needs trains, trams and metros, and the State is committed to facilitating their construction.
Compared to the 2022 budget, expenditure on National Education will increase by 15.1 billion ILS (+22.8%), that of the National Insurance Fund by 11.4 billion ILS (+22.9%) , those of the Ministry of Health of 6.5 billion ILS (+14.9%) and those of Defense of 4.8 billion (+8%). Environmental protection and innovation authority are expected to be the main losers.
The increase in the National Education budget responds to a demographic trend (approximately +2% per year). To this is added in part new spending on ultra-Orthodox schools which “educate” a quarter of the children but which do not all follow the national curriculum. The increase in teachers’ salaries also explains the increase in the education budget.
The demographic challenge is also felt in the demand for housing, in a context of dizzying price increases due to unsatisfied demand for limited land space. The planning law provides for the creation of a housing promotion fund intended to increase supply and reduce the gaps between municipalities. The fund will provide grants to improve municipal services. This will contribute to a goal of redirecting part of public aid and local taxes to ultra-Orthodox municipalities.
With regard to the fight against the cost of living, the new government confirms what the previous government had launched to reduce the cost of food, in particular fruit and vegetables, the consumption of which has fallen by 25% per inhabitant in two decades.
The government also intends to bring the prices of cosmetics back to the level of those practiced in the average of OECD countries. Regulatory convergence with the EU is confirmed and the deconcentration of mass distribution will be facilitated. Other reforms focus on the transparency of bank charges, the reduction of the regulatory burden for small traders, and the strengthening of technological education (while high tech lacks manpower).
Source Embassy of France in Israel