Israel budget deficit spikes with Gaza war expenses

An Israeli soldier gestures while riding in a military vehicle, amid the ongoing conflict between Israel and the Palestinian Islamist group Hamas, near the border with Gaza, in southern Israel, Dec 9, 2023. REUTERS/Athit Perawongmetha

JERUSALEM  –Israel registered a budget deficit of 16.6 billion shekels ($4.5 billion) in November, the Finance Ministry said on Sunday, citing a jump in expenses to fund Israel‘s war with Hamas militants in the Gaza Strip.

As a percentage of GDP, the deficit over the previous 12 months rose to 3.4 percent in November – 62.3 billion shekels – from 2.6 percent in October, it said.

A ministry source said the deficit for 2023 would finish at about 4 percent of GDP, above a target of 0.9 percent, or 16.9 billion shekels, in the budget approved by lawmakers in May.

The ministry noted that revenue fell by 15.6 percent last month, partly because of tax deferments resulting from the war that began on Oct. 7.

November revenue was 30.3 billion shekels, the lowest monthly level this year. For the first 11 months of the year, revenue reached 401.5 billion shekels, 6.2 percent lower than the same period last year.

Overall, the war is expected to weigh on growth in 2023 and 2024. The ministry and central bank project growth of 2 percent this year and 1.6 percent and 2 percent respectively in 2024.

Expenses reached nearly 47 billion shekels, with about 6 billion attributable to the war, helping to push up January-November spending by 11.5 percent to 445.3 billion shekels.

Israel‘s deficit in October was 22.9 billion shekels and in November 2022 it was 1.7 billion shekels.

Last week parliament gave its initial nod to a war budget that would add more than 30 billion shekels to spending on the war for the rest of 2023. The plan still requires final approval.

($1 = 3.7033 shekels)