Israel’s deficit balloons to 8.1% of GDP amid heavy war spending

Israel’s fiscal deficit widens to 8.1 percent of gross domestic product (GDP), or NIS 8.5 billion ($2.2 billion), in July over the prior 12 months, as the government continues to pour billions of shekels into funding the months-long war with Hamas and the heated conflict with Hezbollah, according to preliminary figures released by the Finance Ministry.

It marks the fourth month that the deficit is above the government target of 6.6% of national output set for 2024. Israel posted a budget deficit of 4.2% in 2023.

The deficit was 7.6% of GDP in June, 7.2% in May, and 7% in April, amid growing military and civilian spending.

In July, government expenditure amounted to NIS 49.4 billion, taking spending since the start of the year to about NIS 350 billion, an accumulative increase of 33% compared with the same period in 2023. War costs since the outbreak of the fighting triggered by the October 7 Hamas onslaught ballooned to NIS 88.4 billion.

“The increase is mainly due to high expenses for the defense and security system as well as for civil ministries because of the war in addition to rigid payments resulting from agreements,” the Finance Ministry notes in the report.

The July figures show that state revenues amounted to NIS 40.9 billion, up from NIS 39.1 billion during the same month last year. Total revenue from the beginning of the year amounted to about NIS 277.8 billion compared to NIS 269.4 billion in the corresponding period last year, marking an increase of about 3.1%.