Israel's Budget Deficit Holds at 3.3% Amid Rising Government Spending

Israel's Ministry of Finance released budget execution data for July showing a stable fiscal deficit at 3.3% of GDP over the past 12 months, well below the government's 2026 target of 4.9%. This stability is largely due to a sharp 11.8% increase in state revenues since the start of the year, totaling approximately 362.1 billion shekels, reflecting robust economic activity. Tax revenues alone rose by 14.5%, with July revenues reaching about 55 billion shekels.

Government expenditures from January through July amounted to roughly 373.6 billion shekels, marking a moderate 3.5% increase compared to the same period last year. Defense spending saw a significant rise of 12.6%, totaling 108.2 billion shekels, while civilian ministry expenses decreased by 1.3%. The Finance Ministry anticipates an acceleration in spending in the coming months toward year-end.

In July, the monthly deficit was about 4.8 billion shekels, similar to July of the previous year. However, the cumulative deficit since the beginning of 2026 stands at approximately 11.5 billion shekels, a substantial improvement from the 37.2 billion shekels deficit recorded in the same period in 2025. These figures have been welcomed by Finance Ministry officials as evidence of Israel's economic resilience.