The deficit may spiral out of control if the Knesset balks at passing the 2003 budget, warned Finance Ministry director-general Ohad Marani on Wednesday.

"The critical phase of passing the budget in Knesset will be hard because of the various considerations of the parties, not all of which are purely financial," Marani said at a general assembly of the Exports Institute, an arm of the Ministry of Industry and Trade.

"I cannot say at this time whether the budget will pass in Knesset. But I can say that if it does not, there is danger that the deficit will spiral completely out of control, which could generate intense nervousness I the financial markets and lead the economy to places we do not want to go," Marani added.

In his lecture, Marani reviewed the main points of the 2003 budget, which he called one of the most dramatic to be served up in recent years.

He said the treasury had adopted an extremely conservative growth estimate of 1% for next year, which, he said, is below the average forecast of economists.

The Finance Ministry means to pass the budget through Knesset without amending it, although subsequent changes may be introduced, as happens every year.