Diario Judío México - A combination of high tax revenues, reduced government spending and a new  formula for calculating gross domestic product have brought the 12- month  deficit through August down to 3.3 percent of GDP, according to the Finance  Ministry – well below the 4.65% target for the year.

News that the  deficit had exploded last summer – it measured at 4.2% of GDP at the same time  last year, over double the original 2% target – fueled a political backlash and  became a subject of debate in January’s general elections. The target for 2012  was raised to 3%, and new taxes were imposed. Using the new formula for  measuring GDP, however, last year’s deficit would only have been  3.9%.

The Central Bureau of Statistics changed the GDP formula, which  measures economic output, with little fanfare prior to Rosh Hashana. The new  formula, which included items such as investments in research and development  among a slew of other small changes in the calculation, increased the overall  measurement for 2013 by NIS 66 billion, according to Globes.

Because so  many fiscal targets are calculated in reference to GDP, the new formula could  have longstanding implications for budgetary policy.

The Finance Ministry  on Monday said it was weighing the implications on the budget of the new method  of calculating GDP.

Finance Minister Yair Lapid, who aggressively raised  taxes and cut back planned spending increases, welcomed the data, saying the  ministry leadership is paying careful attention to changes in the budget’s  implementation.

Lapid came under fire for the heavy-handed budgetary  moves he proposed in May; and during the lengthy budget proceedings in the  Knesset was forced to soften the blow of some of his harsher policies. Among the  less popular changes were higher income taxes; increased value-added tax; new  taxes on cigarettes, beer and alcohol; and reductions in child  allotments.

Whereas overall spending in 2013 was expected to increase  8.8% from the previous year, actual spending thus far has only increased  4.8%.

The updated budget numbers could bring calls for Lapid to again  lower taxes, or reverse spending cuts. That may be difficult, however; many  economists forecast that the 2014 budget will overshoot the deficit target of  3%.

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