Israel's Budget Deficit Rises Amid Concerns of Upcoming Spending Surge
Translated & summarized from Maariv by baba
Israel's budget deficit is rising, with concerns about a significant spending increase in the final two months of the year. While revenues have grown by 10% year-to-date, government expenditures are accelerating, particularly in defense. If the remaining budget is fully spent, the deficit could reach the projected 4.9% of GDP, or potentially exceed it if spending surpasses the framework or revenues fall short.
The story in 6 lines · by baba
- Israel's budget deficit is increasing, with fears of a spending surge in the next two months.
- Government revenues rose 10% year-to-date to over 503 billion shekels.
- October government spending increased 10% year-over-year to 64.5 billion shekels.
- Defense spending is up 9.9%, while civilian ministry spending rose only 1.4%.
- Approximately 147 billion shekels remain to be spent by year-end.
- The deficit could reach the 4.9% target or exceed it based on year-end spending.
Israel's state budget deficit is showing an upward trend, with concerns mounting over a potential surge in spending in the final two months of the year. While the state has collected over 503 billion shekels since the beginning of the year, government expenditures are accelerating. If the government fully utilizes its budget and revenues meet projections, the deficit could reach the targeted 4.9% of GDP.
Despite the rising deficit concerns, the state's revenue collection has been robust. In October, revenues reached approximately 46.2 billion shekels, marking a 10% increase from the same period last year, totaling about 503.3 billion shekels year-to-date. Tax revenues alone grew by 12.9% to 488.3 billion shekels. However, some of October's tax income, around half a billion shekels from VAT and direct taxes, was deferred from September due to the High Holidays, meaning the real monthly tax growth was closer to 4.1% year-on-year.
Government spending also saw a significant increase in October, reaching approximately 64.5 billion shekels, up from 57.1 billion in September and 10% higher than October of the previous year. Year-to-date, government expenditures stand at about 551.1 billion shekels, a 4.2% increase compared to last year, though still below the 7.4% approved in the budget. Defense spending has risen by 9.9% to 153.4 billion shekels, while civilian ministries' spending increased by only 1.4% to 328 billion shekels.
The critical period lies ahead, as only 78.9% of the 698.2 billion shekel budget framework has been spent by the end of October. This leaves approximately 147.1 billion shekels to be spent in the last two months, averaging about 73.6 billion shekels per month, which is nearly 9 billion shekels more than October's spending. This acceleration is already evident, with the year-to-date spending growth rate climbing from 3.4% in September to 4.2% in October.
Finance Minister Bezalel Smotrich might be able to celebrate if the current deficit rate is maintained. However, if the remaining budget is spent rapidly as expected, the deficit could climb significantly. Full utilization of the spending framework, coupled with projected revenues, would bring the deficit to the 4.9% target. Exceeding the budget or falling short on revenue could push the deficit even higher.
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