Israel’s fiscal deficit continued to widen in February, reaching 5.6% of GDP over the past 12 months, or NIS 105.3 billion, the Ministry of Finance accountant general Yali Rothenberg reports. The fiscal deficit widened by 0.8% or NIS 13.4 billion from 4.8% at the end of January 2024.
Israel’s revised 2024 budget, which is due to be approved by the Knesset on Wednesday, is built around a 6.6% budget deficit. The latest fiscal deficit data means that the Ministry of Finance is within just 1% of the target for the end of 2024, already at the end of the second month of the year.
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The Ministry of Finance believes that the deficit will continue to widen in the coming few months but will start to narrow towards the final quarter of 2024 following changes in spending and revenue related to the war.
In other words, the deficit is expected to exceed the 6.6% threshold in the coming months and fall top the target only towards the end of the year. It is reasonable to assume that the deficit in October-December 2024 will be narrower than in the corresponding period of 2023, when the war broke out.
In the first two months of 2024 the fiscal deficit totaled NIS 10.9 billion compared with a NIS 16.9 billion surplus in the corresponding period of 2023. In January, surpluses are traditionally recorded, and even in January 2024 a surplus of NIS 2.5 billion was recorded despite the war but the accumulated deficit deepened, because in the previous two years there had been surpluses of about NIS 14-18 billion in January.
At this advanced stage of the war, with the economy experiencing some recovery, the deficit was mainly due to government spending. The rate of increase in government spending since the beginning of the year reached 43.6%. On the other hand, on the revenue side, a very more moderate decrease of 0.4% was reported in January-February 2024, compared with the corresponding period of 2023. The main decrease in direct tax revenues was due to the weakening of the real estate sector and the sharp increase in tax refunds.
Published by Globes, Israel business news – en.globes.co.il – on March 10, 2024.
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