Israel Faces Record Budget Deficit of 4% of GDP Amid Rising the Gaza War Expenses

In a press conference on Sunday, Accountant General Yehli Rotenberg disclosed that Israel is on track to end 2023 with the highest budget deficit in recent history, standing at 4% of the GDP. The announcement coincided with the release of state budget data for November, indicating an accumulated deficit of 3.4% of GDP, totaling NIS 62.3 billion.

The escalating deficit is attributed to mounting war expenses, with the deficit surging by 0.8% since October. Notably, November alone witnessed a deficit of NIS 16.6 billion, a stark contrast to the NIS 1.7 billion deficit in the same month last year. The overall deficit has risen by NIS 34 billion since the onset of the conflict.

The Ministry of Finance anticipates a substantial deficit in 2024, even if the war concludes promptly. Uncertainty looms over the exact figures, considering pending expenditures for evacuees, hotels, business compensation, military funding, and more.

November saw a surge of NIS 10.7 billion in government spending compared to the previous year, with civilian and military expenses totaling NIS 46.9 billion. Cumulatively, the government's expenses for the year reached NIS 445.3 billion, including approximately NIS 7.1 billion in direct war expenditures, compared to NIS 399.5 billion during the same period in the previous year.

Conversely, November revenues amounted to NIS 30.3 billion, contributing to a total of NIS 401.5 billion since the year's commencement. This marks a decrease from the NIS 427.9 billion recorded in the corresponding period last year, primarily due to a decline in tax collection linked to economic sluggishness.

The property tax fund has disbursed NIS 2.1 billion for damages incurred during the conflict, while numerous claims from businesses seeking compensation for revenue loss are pending.

To manage the financial strain, the Accountant General raised NIS 60 billion by issuing bonds since the war's onset, including NIS 25 billion in November. Despite the challenging circumstances, Rotenberg highlighted confidence in Israel's bond markets, with NIS 16.5 billion raised abroad. However, credit rating companies have issued a negative forecast, reflecting the economic challenges posed by the ongoing conflict.