Israeli fiscal deficit surges to 4.2% of GDP amid heightened war costs

By Al Mayadeen English
Source: Agencies
11 Jan 2024 17:48
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At the end of September, just days before the outbreak of the war, the deficit was recorded at 2%.

Israeli soldiers take up positions during a ground invasion in Khan Younis, Gaza Strip on Wednesday, Jan. 10. 2024 (AP Photo)

The Israeli Ministry of Finance Accountant General revealed on Thursday that "Israel's" fiscal deficit expanded to 4.2% of the GDP by December 2023, marking a substantial increase from the 2% deficit recorded at the end of September.

This surge translates to a significant gap of NIS 77.5 billion ($20,7 billion) between government revenues and expenditures, primarily attributed to heightened spending related to the costs of war.

By the end of November 2023, the deficit stood at 3.4%, amounting to NIS 62.3 billion ($16,6 billion). This increase in the deficit is also due to the cost of war.

A stark contrast emerges when compared to late 2022, where, just days after the current administration assumed office, "Israel" enjoyed a modest fiscal surplus of NIS 10 billion. Within a span of one year, this surplus transformed into a deficit, surging by NIS 10 billion.

The substantial rise in the deficit can be traced back to a dual impact—decreasing revenue and escalating government spending.

State revenues experienced a notable decline of NIS 30 billion in the past year, with NIS 24 billion less in tax revenue and an additional NIS 6 billion less in revenue from National Insurance.

Tax revenues witnessed an 8% decrease, plummeting from NIS 428.9 billion in 2022 to NIS 404.4 billion. The decline in tax collection was initiated in mid-2022, coinciding with an increase in interest rates, and intensified following the onset of the war, as underscored by the Accountant General.

Notably, real estate taxes, encompassing purchase tax and betterment tax, saw a substantial 45% decrease in 2023, totaling NIS 14.4 billion compared to NIS 25.4 billion in 2022.

The latest figures for December reveal that the government's current expenditure reached NIS 33 billion. This sum includes an additional NIS 17 billion earmarked for war-related expenses and an extra NIS 5.7 billion allocated for property tax to address damages incurred during the ongoing war.

Killing Palestinians costs 'Israel' $220Mln per day

An analysis by The Washington Post on December 31, 2023, revealed that the war on Gaza is imposing a staggering daily cost of $220 million on "Israel", totaling nearly $18 billion thus far.

Financial newspaper Calcalist found that if the war persists for an additional five to ten months, the potential cost to "Israel" could soar to $50 billion, equivalent to 10% of the regime's GDP.

The toll the war on Gaza has taken on crucial sectors of the Israeli economy, including tourism, the tech industry, and the construction sector which heavily relies on Palestinian labor.

Several reports have highlighted that the mobilization of 350,000 army reservists disrupted the normal functioning of various business sectors.

Adding to a shortage of labor is diminished consumer and business confidence, as well as elevated inflaiton.