A wrongly predicted rate of inflation may result in the government having to impose NIS 18 billion ($5.2 million) in budget cuts and taxes on Israeli citizens in the coming year to avoid hitting the country’s deficit ceiling for 2015, the Bank of Israel said in a twice-yearly fiscal report Monday.

The report stated that while Prime Minister Benjamin Netanyahu and Finance Minister Yair Lapid’s fiscal plan had allowed for a 2.6 percent increase in the budget for 2015, the bank’s most recent calculations showed the increase would actually be limited to 1.1 percent – about NIS 3.3 billion.

While the budget would shrink, the bank said, the government’s expenditures were planned to increase, requiring tax hikes and budget cuts to avoid exceeding the deficit ceiling.

According to the report, the disparity was caused by Netanyahu and Lapid’s exaggerated estimate of inflation and consumer spending in 2014, which they predicted would be higher than it turned out to be. Therefore, the bank said, their budget plans were off the mark by NIS 18 billion, or 1.6 percent of the GDP, and would have to be adjusted to account for the lower figures.

The bank estimated that in light of the figures, which did not conform with Netanyahu and Lapid’s forecasts, the government’s planned expenditures in 2015, including a plan to eliminate the 18% value-added tax for families buying their first apartment, would greatly exceed the deficit ceiling set by Lapid and Netanyahu.

The bank warned that target-price plans aimed at lowering costs, as well as other planned government expenditures, would require the government to recover the necessary funds by various means – for example, by raising taxes.

Last Sunday, Finance Ministry officials reached an agreement with Attorney General Yehuda Weinstein to cancel the 18-percent value-added tax on apartments that cost up to NIS 1,600,000 ($460,000) for first-time home buyers who either served in the IDF or performed national service.

For those who did not complete any kind of national service — mostly Arabs and members of the ultra-Orthodox community — VAT would be waived only on apartments with a price tag of NIS 600,000 ($173,000) or less.

While critics said it was nearly impossible to find an apartment in Israel at such a low price and said it discriminated against Arab Israelis, the Bank of Israel attacked the plan from a financial angle, warning that the funding required would push the budget beyond the deficit ceiling recently set by Netanyahu and Lapid.

Meanwhile Monday, the Central Bureau of Statistics reported that the country’s financial growth had slowed to a 2.1% annual rate in the first quarter as consumer spending and investment decreased. It also said the inflation rate for April was 0.1% — the lowest April inflation rate since 2003.