Israel to trim taxes, water and energy costs to fight inflation

© Reuters. FILE PHOTO: Israeli Prime Minister Benjamin Netanyahu convenes a weekly cabinet meeting at the Prime Minister's office in Jerusalem, January 8, 2023. REUTERS/Ronen Zvulun/Pool

JERUSALEM (Reuters) -Israel will cancel or cut back recent hikes in property taxes, water and energy costs, Prime Minister Benjamin Netanyahu said on Wednesday, unveiling preliminary measures to ease inflation.

Finance Minister Bezalel Smotrich, speaking alongside Netanyahu at a televised news conference, said the government would maintain fiscal responsibility while pursuing the plan.

"Our economy has entered an inflationary spiral," said Netanyahu, who began his sixth term as premier last month astride a religious-nationalist coalition government. "We must turn the wheel around now. We cannot wait until the budget discussions."

Among the measures he announced was subsidizing the price of gasoline, freezing increases in property tax and lowering expected hikes in the cost of electricity and water.

But neither he nor Smotrich said where the supplementary funds would come from.

Israel's annual inflation reached 5.3% in November, its highest since October 2008, and the Bank of Israel projects the rate will dip to 3% by the end of 2023. Israel has an official annual target of 1% to 3%.

Israel posted a budget surplus of 9.8 billion shekels ($2.8 billion) in 2022, or 0.6% of gross domestic product, its first annual surplus in decades, the Finance Ministry said. This followed deficits of 4.4% of GDP in 2021 and 11.3% in 2020. Its 2022 deficit target was 3.9% of GDP.

The Manufacturers' Association, which represents some 1,500 firms and 400,000 workers, said the government's plan was "a first step in the right direction to lower the cost of living and increase economic growth."

(Reporeting by Ari Rabinovitch and Dan Williams; Editing by Cynthia Osterman)