Over the past 12 months the budget deficit expanded by 0.8% reaching an alarming 5.6% of GDP

The ongoing conflict has exacerbated Israel's economic challenges, with the state budget deficit swelling, according to a recent report by the Accountant General of the Treasury, Yahli Rotenberg. Over the past 12 months, the deficit expanded by 0.8%, reaching approximately 5.6% of GDP.

Projections from the Ministry of Finance paint a grim picture, anticipating a further increase in the deficit to 6.6% by year-end. However, concerns persist among government officials and economic organizations, both domestically and internationally, suggesting the deficit could soar even higher, possibly hitting 7%. Such a scenario would necessitate additional austerity measures, potentially impacting various government ministries' budgets in the months ahead.

February's fiscal report revealed a monthly deficit of approximately NIS 13.4 billion, a stark contrast to February 2023, which saw a surplus of around NIS 2.8 billion. Since the start of the year, a cumulative deficit of approximately NIS 10.9 billion has accrued, a departure from the customary January surplus. Over the past year, the deficit has amassed to roughly NIS 105.3 billion.

Despite stable revenues of approximately NIS 35.8 billion in February, and NIS 79.6 billion since the year's inception, akin to the same period last year, expenses tell a different story. Outlays of around NIS 49.2 billion were recorded in February alone, with year-to-date expenditures totaling approximately NIS 90.5 billion. This marks a significant surge from the NIS 63 billion expended in the initial two months of 2023, attributed largely to heightened expenses stemming from the exigencies of war, amounting to roughly NIS 17.3 billion thus far in 2024.

The Accountant General foresees the deficit trend persisting in the near term, with a gradual reduction anticipated towards the latter part of the year. This shift is attributed to alterations in expenditure and revenue dynamics resulting from the ongoing conflict.

As Israel navigates the economic fallout of war, stakeholders remain vigilant, bracing for the challenges ahead and exploring strategies to mitigate the widening budget deficit.