Deficit swells to 5.6% of GDP – NIS 13.4 billion – over past 12 months

The deficit swelled to 5.6 percent of gross domestic product (GDP), or NIS 13.4 billion, in February over the prior 12 months, as the government pours billions of shekels into the ongoing war with the Hamas terror group while tax revenue continues to decline, according to preliminary figures released by the Finance Ministry today.

The deficit rose from 4.8% in January as the government has been forced to increase both military and civilian spending to fund the war. Israel, which posted a budget deficit of 4.2% in 2023, has set a deficit target of 6.6% of national output for 2024.

In February, government expenditure amounted to NIS 49.2 billion, taking spending since the start of the year to NIS 90.5 billion, an increase of 43.6% compared with the same period in 2023. War costs since the start of 2023 stood at NIS 17.3 billion.

As in previous months following the outbreak of the war, tax revenues declined last month, shrinking 1.2% billion year-on-year to NIS 35.4, according to Israel Tax Authority data. Direct taxes fell by about 6.2% in February versus the same month in 2023, while indirect taxes grew 6.8% during the same comparative period.

Net income from real estate taxation plunged 37% to NIS 1.2 billion in February versus the same month in 2023. Income from purchase taxes dropped 37% in February year-on-year and income from capital gains taxes slumped 37% year-on-year.