Budget deficit rate in relation to GDP rose in June to 0.9% and amounted to NIS 15.4 billion

In March Israel moved for the first time from June to an annual deficit in the state budget that increased in April, since then the trend has been a consistent increase in the deficit. In June, the rate of the deficit in relation to GDP in the last 12 months was already 0.9%, which is NIS 15.4 billion. In June, a deficit of NIS 6.2 billion was recorded compared to a deficit of NIS 1.5 billion in May last year. This is according to the data of the Accountant General at the Treasury published today (Sunday). Since the beginning of the year, there is still a surplus of NIS 6.2 billion, which is shrinking every month.
The reason for the increase in the deficit lies in the continuation of the downward trend in tax collection compared to last year, especially real estate taxes, alongside an increase in expenses. In total, the state's tax revenues from January to June amounted to NIS 216 billion compared to NIS 227.3 billion in the corresponding period last year. At uniform tax rates, they decreased Revenues from taxes by 8% Revenues from direct taxes decreased by 10%. Tax collection in June amounted to only NIS 31.8 billion - the lowest monthly rate since September 2021.
Expenditures in June were approximately NIS 38.9 billion, and government expenditures since the beginning of the year were approximately NIS 223.6 billion, compared to NIS 209.3 billion in the corresponding period last year.
The increase in the deficit corresponds well with the Treasury's forecast for the deterioration of the economic data in the coming months. In the document updating the numerator data to the government, the Ministry of Finance states that the deficit is expected to increase and the state's tax revenues will decrease later this year and this is already happening now.
Estimates are that the deficit will now increase every month and reach rates of 2% to 3% at the end of the year. An abnormal increase in the deficit compared to the outline according to the state budget approved by the government and the Knesset will require further budget cuts and possible tax increases, even though Prime Minister Benjamin Netanyahu and Finance Minister Bezalel Smutritz are opposed to raising taxes at this stage.
It should be noted that these developments, against the background of the slowdown in the economy, the coalition agreements, which are enormous in scope and against the background of the legal reform legislation, were foreseen several weeks ago by the former chief economist Shira Greenberg, who resigned from her position 8 days ago. This forecast was sharply criticized by the Prime Minister's Office, Knesset members from the coalition and also the Minister of Finance. It should be noted that for the time being no replacement has been appointed for Greenberg and the Chief Economist Division at the Treasury is running without a director.