10/10/2024–|Last updated: 10/10/202408:35 PM (Mecca time)
The Israeli Ministry of Finance announced – today, Thursday – that the budget deficit reached 8.8 billion shekels ($2.34 billion) last September, with the escalation of the war in the Gaza Strip and its expansion to Lebanon and other fronts.
The deficit rose over the past 12 months to September to 8.5% of GDP, from 8.3% during the 12 months to August, compared to the target of 6.6% for the entire year of 2024, which Finance Minister Bezalel Smotrich is adhering to.
The increase in the deficit to 8.5% comes due to the increase in military and civilian spending to finance the war, and the deficit rises for the sixth month in a row above the annual target set by the government at 6.6%.
It is noteworthy that in 2023, Israel’s budget deficit was at 4.2% and it plans to reduce it to 4% next year, which seems to be far-fetched.
Spending on the war – which began on October 7, 2023 – exceeded 103 billion shekels ($27.35 billion).
The Bank of Israel expects the deficit to decline to 7.5% of GDP by the end of the current year.
Tax revenues increased by 9.6% last September, and rose by 2.6% during the first nine months of 2024.
Downgrade
Earlier this month, Standard & Poor’s credit ratings agency lowered Israel’s long-term rating from “A+” to “A” due to the increasing security risks in light of the latest escalation in the conflict with Hezbollah in Lebanon, in addition to… The risk of a more direct war with Iran.
The agency highlighted concerns about potential security threats, including retaliatory missile attacks against Israel, which could exacerbate the impact of tension on the economy.
Moody’s lowered Israel’s credit rating by two notches to “Baa1” last month, and warned of downgrading it to “high risk” if the current escalating tension with Hezbollah turns into a widespread conflict.
The credit rating agency expected zero growth for the Israeli economy this year due to the escalation of the conflict with Hezbollah, and a budget deficit of 9%.
Moody’s had expected a significant reduction in Israel’s growth during 2025 from 4% to 1.5%, and long-term growth expectations were reduced from 4% to 3% annually.
