Israel’s 12-month budget deficit surged to 105.1 billion shekels ($29.4 billion) by the end of February, representing 5.6% of the country’s gross domestic product (GDP), the Finance Ministry announced on Sunday. This represents an 18% increase from the previous year’s deficit, which totaled 89.1 billion shekels ($24.93 billion) or 4.8% of GDP. This contrasts starkly with the period between March 2022 and February 2023, during which Israel experienced a budget surplus of 3.4 billion shekels ($951 million).
The sharp rise in the deficit has been largely attributed to escalated expenditures due to the ongoing conflict with Hamas, which has already cost 17.3 billion shekels ($4.84 billion). This is in addition to the expenses from last year’s conflict, which amounted to $6.59 billion. The Israeli government’s spending in January and February alone increased by 43.6% compared to the same period last year, while revenue streams remained largely unchanged.
The Finance Ministry anticipates the deficit trend will persist in the upcoming months but expects a reduction towards the end of the year. This optimism is based on a projected shift in the allocation of conflict expenses and income distribution.