Escalations amid Gaza genocide drive 'Israel' deficit to 8.5% of GDP

By Al Mayadeen English
Source: Israeli media
10 Oct 2024 18:11

This has marked the sixth month that the deficit has exceeded the government's annual target of 6.6% of GDP set for the end of 2024 compared to 4.2% in 2023.

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A woman looks at her phone while eating a sandwich next to a shopping cart in occupied Haifa, "Israel", on Thursday, Aug. 15, 2024. (AP)

In September, the Israeli occupation's fiscal deficit rose to 8.5% of its GDP, amounting to around $2.3 billion, as the government continued heavy spending to fund the ongoing wars in the Gaza Strip and Lebanon, according to data from the Israeli Finance Ministry.

Israeli media reported that this has marked the sixth month that the deficit has exceeded the government's annual target of 6.6% of GDP set for the end of 2024 compared to 4.2% in 2023.

As expenditure for military purposes increased, especially noting the escalations from support fronts in Yemen, Iraq, and Lebanon, Israeli media reported that the deficit has also steadily increased over recent months.

According to the numbers published by The Times of Israel, the deficit "progressively widened" from 7.6% in June to 8.1% in July and 8.3% in August, due to escalating military and civilian expenditures related to the conflict.

In September, the occupation government's spending, as reported by Israeli media, reached about $13.5 billion, raising total expenditure for the year to approximately $120 billion, a 31% increase from the same period in 2023. War-related expenses since the onset of the Israeli occupation's genocidal war on the Gaza Strip, last October, have totaled around $27 billion.

Israeli shekel; one of the world’s worst performers since August

"Israel's" central bank is likely to maintain its interest rate at 4.5% for the sixth consecutive time due to rising inflation driven by the ongoing wars in Gaza and Lebanon, according to a Bloomberg report, on October 9, citing 16 surveyed analysts.

Despite a global trend of rate cuts, the Bank of Israel has been constrained, the report noted before citing the Governor of the occupation's central bank, Amir Yaron, as saying that rate reductions may not occur until the second half of 2025 "despite the economy slowing as war hits industries from tourism to agriculture and construction."

Moreover, the report underscored that the Israeli occupation's currency, the shekel, has depreciated by about 3.4% against the dollar since late August and that "Israel's" credit risk premium has reached its highest point in 12 years.

The economic situation has worsened, the report noted, as the Israeli occupation forces expanded their wars on multiple fronts, including Lebanon and Iran, in addition to the Palestinian fronts that are coupled with stalled ceasefire talks.

The report further highlighted the recent credit downgrades from Moody's and S&P Global Ratings, stressing that the ongoing war has strained "Israel's" fiscal situation, with the budget deficit hitting 8.3% of GDP as of August.

Adjustments to the 2024 budget are anticipated, and the 2025 plan is expected to propose spending cuts and tax hikes, Bloomberg explained, adding that if fiscal policies continue to be expansionary, the Bank of Israel might need to counterbalance by raising interest rates to curb inflation which is forecasted to "climb to 5% in early 2025".