Israel debt-to-GDP ratio jumps to 73.1% during 2020 pandemic

JERUSALEM: Israel's ratio of debt to gross domestic product (GDP) rose 13% in 2020 to 73.1% from 60.0% in 2019, the Finance Ministry's accountant general said on Thursday, citing a steep rise in spending to deal with the COVID-19 pandemic.

"This increase follows a decade in which the rate dropped gradually by about 11%," said Accountant General Yali Rothenberg. "We expect the debt-GDP ratio to continue to rise in the coming years, though it is of great importance to return it to a path of decline after the economy recovers."

Government spending rose 78.8 billion shekels ($24 billion) in 2020 from a year earlier in order to deal with the crisis, while state revenue dropped by 29.4 billion shekels, according the Finance Ministry. The ministry's estimate of the 2020 debt-to-GDP ratio, which is a key indicator of a country's financial strength, was preliminary and could be modified in the coming months.

Israel's ratio was below that of the euro bloc (101.1%) and developed countries overall (135.0%), but above those of Chile, Denmark, Norway, Switzerland, Mexico, New Zealand, Poland, Slovakia and the Czech Republic, the ministry said.

Despite the sharp spending increase throughout 2020, credit rating agencies have left Israel's sovereign rating unchanged citing strong external finances and a diversified, high value-added economy.

Israel recorded a budget deficit of 11.7% of GDP last year, up from 3.7% in 2019.

Due to a protracted political stalemate that has led to four elections in two years, the government did not pass a 2020 budget and has been using a pro-rated version of the 2019 budget that was approved in 2018.