Israel’s cumulative deficit for the last 12 months grew by 0.4% and stood at 7.6% in June, according to the Finance Ministry's first prediction, announced Monday.

This eclipses the 6.6% deficit ceiling set in the updated version of the 2024 budget, in March, intended to apply until the end of the year.

The deficit is expected to continue to grow until the end of the third quarter of 2024, when it is expected to begin to decrease if a full-blown war does not develop in the North, the ministry said.

Government spending was 30.9% higher this June than it was in June 2023, while income was only 11.7%  higher than at the same time last year.

The cumulative growth rate of government expenses between January and June of 2024 was 34.2% higher than for the same period last year. When neutralizing war expenses, it was 9.3% higher than last year. The cumulative growth rate of income was 3.3% higher between January and June of 2024 than at the same time last year.

CEO of Poalim Capital Markets Kobi Shalom (credit: RAYA ALTMAN)
CEO of Poalim Capital Markets Kobi Shalom (credit: RAYA ALTMAN)
Government spending since the beginning of the year was NIS 300.3 billion compared to NIS 223.7b. at the same time last year.

How the government is financing the deficit

The government is financing the deficit through three main channels – raising funds locally through bond sales, foreign bond sales, and selling state assets, said the ministry.
Increased government spending is partially made up of expenses that don’t support growth, Bank Hapoalim’s head economic consultant Professor Leo Leiderman said Monday at the annual conference of the Israeli Association of Publicly Traded Companies.
“Especially now, during war, the government is not doing enough to support the growth of the economy,” he said.
“The 2025 budget will be the real test of the government’s economic policy. If things proceed as they are, unfortunately we are headed to another lowered credit rating. In fact, global markets have already dropped our rating and the country’s risk premium has risen to levels we have not seen before,” he said.
Leiderman also warned that if Israel’s GDP per capita continues to decrease, it could lead to a recession.