Bank of Israel Governor Alarmed by Budget Uncertainty Until 2027
Translated & summarized from Cursorinfo by baba
Bank of Israel Governor Amir Yaron is concerned that budget uncertainty will last until mid-2027, potentially delaying economic reforms. This follows Prime Minister Netanyahu's speech at the new Knesset, which Yaron attended. The article also discusses the Tax Authority's proposal to reinstate a travel tax to address the budget deficit and the broader economic impact of political instability on the Tel Aviv Stock Exchange. The delay in forming a government and approving a budget is seen as a major obstacle to economic recovery and stability.
The story in 5 lines · by baba
- Bank of Israel Governor Amir Yaron fears budget uncertainty will persist until mid-2027.
- Prime Minister Netanyahu's speech at the new Knesset reportedly alarmed Governor Yaron.
- The Tax Authority is considering reintroducing a travel tax to help close the budget deficit.
- Political uncertainty and delays in forming a government are hindering economic reforms.
- The Tel Aviv Stock Exchange has experienced a downturn due to macroeconomic and political factors.
Governor of the Bank of Israel Amir Yaron expressed concern that the ongoing uncertainty surrounding the state budget could extend until mid-2027, potentially delaying crucial economic decisions. Yaron reportedly left a ceremony for the new Knesset after hearing Prime Minister Benjamin Netanyahu's speech, feeling "alarmed" by the prospect of prolonged budget limbo.
Columnist Yehuda Sharony, writing for Maariv, highlighted this concern, linking it to broader economic issues. Sharony pointed to a petition filed by Kiryat Shmona's mayor, Avichai Stern, against the government for compensation for residents evacuated due to security concerns. Despite Stern's prior support for Netanyahu, the petition underscores a lack of government responsibility for affected citizens, with tax authority stating compensation rights ended February 28, 2025.
Sharony also noted the Tax Authority's recommendation to reintroduce a travel tax, a move he views as a barometer of economic health. This tax, previously implemented during times of economic hardship and abolished when conditions improved, is now being considered again to address the budget deficit exacerbated by the war. The Tax Authority hopes to raise 1.1 billion shekels annually from this tax, though official reasons cite environmental and health concerns.
The article further discusses potential new taxes, including a 1.5% property tax on vacant land and online VAT collection, but emphasizes these cannot be implemented without an approved budget. The deficit is expected to grow, impacting the economy negatively. Meanwhile, the Ministry of Finance is finalizing economic measures to avoid further delays, though tax measures require budget approval and cannot be implemented mid-year due to system complexities.
Governor Yaron is unlikely to lower the current interest rate of 3.25% in the coming year, especially with rising global rates. The prolonged political deadlock, preventing the formation of a government and budget approval, is seen as a significant impediment to economic stability and reform. The article criticizes the delay in forming a government, comparing the situation to buying a car but refusing to start the engine.
Separately, the article touches on the Tel Aviv Stock Exchange's performance. While third-quarter reports showed significant gains in revenue and profit for the exchange, the first half of November saw a downturn. This decline is attributed to macroeconomic factors like high interest rates, the outcome of US midterm elections impacting tech investments, and the general political uncertainty in Israel. Despite the recent dip, the author urges a balanced perspective, recalling strong market performance in previous years and cautioning against panic-driven selling.
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