War Spending Drives Israel’s Deficit to 8.3 Percent of GDP, Surpassing Government Target

Israel's fiscal deficit has surged to 8.3 percent of gross domestic product ( GDP ), equivalent to NIS 12.1 billion ($3.2 billion), according to preliminary figures released by Finance Ministry. This sharp increase comes as country continues to invest heavily in ongoing conflicts with Hamas and Hezbollah.

This marks fifth consecutive month that deficit has exceeded government’s annual target of 6.6 percent of national output, a goal set for end of 2024. For context, Israel’s budget deficit stood at 4.2 percent of GDP in 2023.

cost of war

deficit has grown from 8.1 percent of GDP in July to 8.3 percent in August. This rise reflects escalating military and civilian expenditures related to protracted war with Hamas, which began on October 7. trend has been consistent, with deficit increasing from 7.2 percent in May and 7.6 percent in June.

In August, Israeli government’s expenditure reached NIS 49.5 billion, bringing total spending for year to approximately NIS 399 billion. This represents a 32 percent increase compared to same period in 2023. Since onset of conflict in October, costs associated with war have surged to NIS 96.9 billion.

Will deficit continue to rise?

Yes. Finance Ministry anticipates that deficit will continue to rise until end of third quarter, which concludes in September. However, officials expect a shift to a downward trend reafter.

State revenues for August totaled NIS 37.4 billion. For year to date, total revenue stands at around NIS 315.2 billion, compared to NIS 303.2 billion during corresponding period last year, reflecting a 4 percent increase. Tax revenue saw an 8.1 percent rise in August and has increased by 1.9 percent since beginning of year, according to Israel Tax Authority.

As government grapples with financial strain of ongoing conflicts, impact on Israel’s fiscal health is becoming increasingly evident.