Israel’s budget deficit has risen to a new record high of 8.1% of GDP, driven by increased government and military spending as its war on the Gaza Strip enters its 11th month.
This is the 16th month that Israel’s fiscal deficit has risen, according to the Israeli economic newspaper Globes.
Deficit after surplus
Since the beginning of 2024, the fiscal deficit has reached NIS 72 billion ($19 billion), compared to a surplus of NIS 6 billion ($1.6 billion) in the first seven months of 2023.
The budget deficit reached about 155 billion shekels ($40.3 billion) over the past 12 months, with an additional 8.5 billion shekels ($2.2 billion) in July alone, according to a Finance Ministry report, part of which was carried by Israeli newspapers, including Yedioth Ahronoth and Globes.
The deficit in July compares to a deficit of NIS 600 million ($158.32 million) in July 2023.
Spending
Government spending until the end of July since the beginning of the year amounted to more than 352 billion shekels ($92.88 billion), an increase of 32.8% compared to the same period last year.
The main increase in the deficit was due to higher spending on defense and civilian ministries due to the war, however even excluding war expenses the increase in government spending was about 8.7%.
In contrast, revenues increased by only about 3.1%, reaching about NIS 278 billion ($73.35 billion) since the beginning of the year, compared to NIS 269 billion ($71 billion) in the first seven months of 2023.
The Ministry of Finance expects the deficit to peak by next September, before starting to decline. The Ministry of Finance’s budget department believes that the deficit will head towards the 6.6% target, on the basis of which the state budget was approved last March.
