Israel’s fiscal deficit more than doubles since start of war

Israel’s fiscal deficit widened to 4.2% of GDP at the end of December 2023, the Ministry of Finance Accountant General has reported – a gap of NIS 77.5 billion between government revenues and spending. On the eve of the start of the war, the deficit was 2% at the end of September, meaning that it has more than doubled due to war expenditure.

The deficit has widened from 3.4% and NIS 62.3 billion at the end of November 2023 as the cost of the war escalates. At the end of 2022, a few days after the current government was sworn in, Israel had a small fiscal surplus of NIS 10 billion, so within a year the deficit has ballooned by NIS 10 billion.

The sharp increase comes from both a fall in revenue and a rise in government spending. Over the past year, state revenues fell by NIS 30 billion with NIS 24 billion less revenue from taxes NIS 6 billion less revenue from National Insurance.

Tax revenues fell 8% to NIS 404.4 billion from NIS 428.9 billion in 2022. Tax collection began falling in mid-2022 after interest rates began rising and the Accountant General notes that the fall in tax collection accelerated after the start of the war. Real estate taxes – purchase tax and betterment tax – fell 45% in 2023 to an overall NIS 14.4 billion from NIS 25.4 billion in 2022.

Government current expenditure in December was NIS 33 billion with an additional NIS 17 billion in war expenditure and NIS 5.7 billion in property tax for war compensation damage.

Published by Globes, Israel business news – en.globes.co.il – on January 11, 2024.

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