Israel's fiscal deficit broadens significantly
Date
7/11/2024 6:50:03 AM
(MENAFN) Israel's fiscal deficit widened considerably in June, reaching 7.6 percent of the nation's Gross Domestic Product (GDP) over the past 12 months. This translates to 146 billion shekels ($39.77 billion), up from 7.2 percent in May, according to Yali Rothenberg, the Accountant General of the Finance Ministry, as reported by the Israeli newspaper Globes.
This deficit is 1 percent higher than the government’s target of 6.6 percent for the year’s end. In June alone, the fiscal deficit stood at 14.6 billion shekels (USD4 billion), a significant rise from 6.4 billion shekels (USD1.74 billion) in June of the previous year. Since the start of the year, the fiscal deficit has ballooned to 62.3 billion shekels (USD17 billion), a stark contrast to the surplus of 6.6 billion shekels (USD1.8 billion) recorded during the first half of last year.
Government spending has surged past 300 billion shekels (USD81.72 billion) since the beginning of the year, marking a 34.2 percent increase compared to the same period last year. Excluding war expenditures, the increase in government spending is still about 9.3 percent, compared to a modest 3.3 percent rise in state revenues. State revenues have amounted to approximately 238 billion shekels (USD64.83 billion) since the beginning of the year, up from 230.4 billion shekels (USD62.76 billion) in the first half of the previous year.
The Finance Ministry projects that the fiscal deficit will peak by September before starting to decline. This forecast comes as the Bank of Israel has downgraded its economic growth projections, citing a "high level" of geopolitical uncertainty. This adjustment reflects expectations of a prolonged and intensified conflict with Palestinian resistance and an increased risk of escalation with Hezbollah on the northern border.
Amir Yaron, the Governor of the Central Bank of Israel, stated in a recent press conference in Jerusalem, "The bank assumes that the war will continue with higher intensity until the end of this year and will end at the beginning of next year, later than the previous expectations set in April."
The increasing fiscal deficit and escalating government expenditures highlight the economic challenges Israel faces amid ongoing geopolitical tensions. The government's ability to manage its budget and control spending, while navigating these challenges, will be crucial in the coming months.
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