The budget deficit for the last twelve months is already 3.9 percent of GDP, compared with 3.8 percent in the previous update in May. The reason for the exceptional deficit is a jump in government spending, while its tax revenues remain stable.
The treasury's forecast is for a deficit of 3.6 percent at the end of the year, which is about NIS 50 billion, since the beginning of the year has already accumulated a deficit of NIS 21.9 billion. The target in the state budget for 2019 is a deficit of 2.9%.
As of June, government expenditure was 10.4% higher than in the corresponding period last year, when the plan was for 5.1% growth.
The Tax Authority explained that state revenues this month were lower by about NIS 300 million due to the update of the green taxation formula on April 1, an update that led to the establishment of car imports for March at the expense of imports in the coming months. According to the estimate, the advance of imports increased the collection by NIS 2.1 billion in March, of which NIS 0.7 billion at the expense of April, NIS 0.6 billion at the expense of May 2019 and NIS 0.3 billion at the expense of June.
Last month, the government approved the Finance Ministry's emergency plan, which includes broad cuts in ministry budgets. The cut is meant to finance additional budget expenditures for security needs and subsidize lunch, and the program's impact on the deficit will be felt only in 2020, when an even more severe deficit is expected this year, if no steps are taken to reduce it.
The first cross-sectional cut has already been approved, amounting to NIS 1.15 billion - a small sum compared to the size of the fiscal problem that has been created. As of June, the actual deficit is still NIS 4 billion away from the ceiling that is updated after efficiency measures.
In 2018, Israel's debt-to-GDP ratio rose for the first time in a decade to 61 percent of GDP, and the government's interest-rate rebates increased to reach more than NIS 16 billion in the first half of 2019 - that is, the government spent NIS 16 billion only for payment of debts.
Total government ministries' expenditure since the beginning of 2019 amounted to NIS 166.8 billion, an increase of 10.4% compared to the same period last year. The expenditure of civilian ministries increased by 13 percent (compared with a planned increase of 6 percent), and defense expenditure rose by only 1.7 percent, according to planning.
State revenues from taxes in the first half of 2019 rose by only 1% in real terms over the same period last year, with a real decrease of about half a percent in the same period in direct taxes (VAT and purchase taxes).