Israel heading for Greek-style recession

Assaf Geva, an economist in the Israeli Finance Ministry has warned that a Greek-style fiscal tragedy was waiting for Israel, according to Haaretz.

By Geva’s reckoning, government spending will be growing by 1.2 percentage points faster than gross domestic product every year, mainly because of Israel’s aging population.

Based on his researches, the gap between the growth of government spending and government revenues will be fatal for government finances.

In today’s terms, that gap of 0.8 point amounts to a shortfall of about 9 billion shekels ($2.3 billion).

Meanwhile, Israel’s debt will begin to start climbing as a percentage of GDP. In recent years, debt has been falling and today equals about 67% of GDP.

Greece’s, by way of comparison, is 175%, but Israel is a long way from the 60% policy makers have been targeting.

But with the gap between income and expenses widening, the downward trend will come to an end sometime around 2030, and the ratio will then grow to 88% by 2059.