The Israeli Ministry of Finance said on Thursday that Israel recorded a budget deficit amounting to 4.2% of gross domestic product in 2023 compared to a surplus of 0.6% in 2022, attributing the matter to an increase in government spending to finance the war it has been waging against the Gaza Strip for 97 days. The deficit was expected to reach 3.4% in a previous estimate last November.
She added that the deficit recorded last December alone amounted to 33.8 billion shekels ($9 billion).
According to the ministry, the deficit for the entire year amounted to $18.5 billion, while tax revenues declined by 8.4%.
Last December, lawmakers approved the war budget for 2023, amounting to about 30 billion shekels.
Government ministers are scheduled to begin voting next Sunday on a revised budget for the year 2024 that took into account expenses in addition to defense and war costs, which is expected to push the budget deficit to 6% this year.
Yesterday, Wednesday, Governor of the Central Bank of Israel, Amir Yaron, called on the government to adhere to fiscal discipline and compensate for planned spending with cuts in non-essential areas while raising some taxes.
The governor estimated that the cost of the war on Gaza would reach 210 billion shekels ($56 billion) for defense and compensation for those displaced from their homes in the south, due to Palestinian resistance operations, or the north, due to missiles targeting them from Lebanon.
Last year, Israel approved a two-year budget for 2023 and 2024, but the war on Gaza has overwhelmed the government financially, requiring budget changes and additional spending. Last year, the deficit amounted to 77.5 billion shekels ($20.7 billion).
Before the war that began on October 7, the deficit was 1.5% of GDP last September.