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Friday, January 7 2000 01:17

One-time import surge cut '99 budget deficit

By Eli Groner

JERUSALEM (January 7) - A major factor contributing to the unexpected drop in the government's budget deficit last year was due to a surge in imports of consumer durables and automobiles in the second half of the year, which lifted the Treasury's customs revenues, a senior Treasury source said yesterday.

Although renewed economic growth in the second half also contributed to higher tax revenues, the source said the customs revenues appeared to be a one-time factor that would not help pad state revenues in the current year.

The Treasury on Wednesday reported that a preliminary analysis showed that the budget deficit last year was only 2.25 percent of gross domestic product, above the 2.0% target but well below the 3.25% number widely predicted only a few months ago. The Treasury said early estimates showed the deficit would amount to NIS 9.18 billion (not counting credits granted), only NIS 1.2b. more than budgeted.

The deficit target is a key element of the government's economic policy, and narrowing it to a level just above the target was hailed by Finance Minister Avraham Shohat as a major policy success and attributed to the turnaround in business confidence since Prime Minister Ehud Barak's election last May.

The Treasury source said that although one-time factors were a major factor in reducing the deficit, in fact an improved economy also contributed, and that the outlook for the 2000 deficit is good. The budget calls for the deficit not to exceed 2.5% of GDP.

"If there really is an economic revival, then the 2000 deficit will be lower than 1999's," an official said.

The source said the otherwise inexplicable growth in imports of items like automobiles, white goods, and electronics was probably due to concerns about Y2K.

"Many people were expecting a major run to the dollar ahead of the calendar changeover," the source said.

This explanation for surging imports will be published in a study being prepared by the Ministry of Finance's macro-economics division in its next official publication, due out at the end of the month.

For much of last year, economists had believed that there would be a flight to the dollar towards the end of 1999 out of concern that Y2K computer breakdowns would cause widespread economic disruptions.

In fact, the shekel strengthened in the last weeks of 1999.

Yesterday, after reaching 4.124 to the dollar on Monday, the shekel weakened to 4.1520.

Another one-time factor that contributed to higher tax revenues last year was a campaign undertaken by Meir Shetreet, the last finance minister in Prime Minister Binyamin Netanyahu's government, to collect back property taxes. Shetreet's campaign, which began in mid-May, aimed to collect NIS 10 billion in overdue property taxes, approximately NIS 4b. of which was deemed collectible.

The Treasury offered preferred terms and discounts to taxpayers who paid up during the campaign, which Finance Minister Avraham Shohat extended until the end of the year.

[ENDS]

-- John Whitley (jwhitley@inforamp.net), January 06, 2000

Answers

Ya gotta admit (no matter how it all turns out) they (Koskinen, the bankers, Wall Street, etc.) did a fabulous job of attaining their goal of a placated population mass. Between that and the intellect of the sheople, it'd'a been real ugly if their crossed fingers hadn't worked so good on Dec31-Jan1.

-- Think It (Through@Pollies.Duh), January 06, 2000.

Now if you read my earlier post you know why i'm still wondering about what it is all about.Even if i did get flamed from Porkey and a There is more to this Y2K then meets the eye.

-- wondering (still@wondering.com), January 07, 2000.