Israel's fiscal deficit narrows for second straight month

The deficit for the twelve months to the end of November this year was 7.7% of GDP, the Ministry of Finance reports.

Israel's fiscal deficit has narrowed for the second consecutive month. The deficit for the twelve months to the end of November this year was 7.7% of GDP, or NIS 150 billion, Ministry of Finance accountant general Yali Rothenberg reported today. In the 12 months to the end of October the fiscal deficit stood at 7.9% of GDP, or NIS152 billion. The fall in the fiscal deficit over the past two month follows 18 consecutive months of rises.

Since the start of 2024, the Ministry of Finance has estimated that the deficit would peak in September, and would then decline somewhat. This is because the spike in government spending in October last year when the war broke out has dropped out of the twelve-month figures. November 2023 when there was high defense spending has now also dropped out of the figures.

The Ministry of Finance initially hoped that the deficit would continue its monthly downward trend until the end of the year, but at the moment it does not appear that this will happen in December. The Knesset is expected to soon approve the 2024 budget increase of NIS 33 billion and an increase in the deficit to 7.7%, so at least according to the latest Ministry of Finance legislation, the deficit is expected to remain at about the same level in December. Minister of Finance Bezalel Smotrich had estimated that his ministry would succeed in bringing the deficit within the 6.6% GDP target by the end of 2024.

Since the start of 2024, a cumulative deficit of NIS 116.6 billion has been recorded, compared with a deficit of only NIS 43.5 billion in the corresponding period in 2023, the bulk of which was in October 2023.

Most of the increase stems from high spending by the Ministry of Defense and civilian ministries due to the war. Estimated war spending since the start of the year has been NIS 87.9 billion, and NIS 112.8 billion since the outbreak of the war. Even excluding war spending, there has been a 7.5% increase in government spending. Until recently, there has been a consistent month-to-month decline in this figure, but an increase was recorded in November.

State revenues have increased by an impressive 8.9% since the beginning of the year, despite the war, and here an encouraging trend of continuous increase has persisted for many months. However, in the face of an overall jump in spending of 24.5%, this is still not enough, with a deficit of NIS 8-15 billion every month in 2024.

Published by Globes, Israel business news - en.globes.co.il - on December 9, 2024

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