Even before the war began, Israel's fiscal deficit widened to 1.5% of GDP at the end of September 2023, amounting to NIS 27.4 billion over the past 12 months, the Ministry of Finance Accountant General Division reports. Israel's fiscal deficit was up from 1.3% at the end of August and is now well above the annual target of 1.1% set by the government when the budget was approved in May.
The effects of the fighting on the country's fiscal situation will be felt in the next Ministry of Finance report at the end of October. The deficit has been on the rise for the past six months, but is still relatively low, and overall constitutes a good starting point for the economic front of the war.
The deficit has been widening from both sides, due to a decrease in state revenues and an increase in government spending. These trends are expected to continue in the near future. Many defense expenses are expected to pile up on the Ministry of Finance table in the coming months, and it seems that a financial aid package for businesses will also be required. In terms of state revenues, a slowdown in economic activity will result in a decrease in tax collection.
Since the start of 2023, state tax revenues have fallen by 4.1%, compared with the same period in 2022. At the same time government spending grew 8.7% in the first nine months of 2023. The state budget took only into account an increase in government spending at a lower rate, of 7.6%.
Published by Globes, Israel business news - en.globes.co.il - on October 12, 2023.
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