Israeli Budget Deficit Reaches New Heights Amid Revenue Collapse and Spending Expansion

SadaNews Economy - A report published by the Hebrew newspaper Calcalist has shown that the financial deficit in Israel continued to rise in October, reaching 4.9% of the GDP, compared to 4.7% in September, amid a significant increase in government spending and a sharp decline in public revenues.

According to the newspaper, the total deficit amounted to about 102.5 billion shekels (approximately 31.3 billion USD) over the past twelve months, reflecting a widening gap between government expenditures and revenues, as the country is projected to end the year with an annual deficit close to 5.1% of GDP, according to Bank of Israel estimates.

Government Spending Soars to Record Levels

Calcalist indicated that October alone recorded a monthly deficit of 15.3 billion shekels (about 4.7 billion USD), one of the highest levels in 2025, following June, which coincided with military operations.

Government expenditures reached 58.7 billion shekels (around 17.9 billion USD), the second-highest monthly amount this year after April, whereas revenues dropped to 43.4 billion shekels (approximately 13.3 billion USD), the lowest level since February.

The newspaper stated that this deterioration reflects the widening gap between revenues and expenditures, warning that "pressures on the public budget are increasing at a pace that threatens to spiral out of control amidst economic slowdown and the ongoing war."

Improvement in Revenue Estimates Does Not Change the Overall Trend

Despite the bleak picture, Calcalist noted that the Ministry of Finance has revised its public revenue forecasts upwards from 517 billion shekels (about 157.7 billion USD) to 539 billion shekels (approximately 164.6 billion USD), after about 85% of this amount has already been collected by the end of the third quarter.

Finance Minister Bezalel Smotrich stated at a press conference last week that the government expects "an additional increase of 10 billion shekels (around 3.1 billion USD)" by the end of the year, but observers warned that this increase is "formal" and insufficient to compensate for the decline in actual tax revenues.

Decline in Tax Power and Escalating Financial Risks

The newspaper explained that the increase in nominal revenues is primarily due to "legislative changes, rising prices, and temporary exceptional deals," noting that the Israeli Tax Authority estimated that actual collections, after excluding these factors, have only increased by 6% during the year, while revenues in October rose by 4.8% compared to the same month last year, reflecting a slowdown in economic activity and a decrease in investment momentum.

Calcalist affirmed that the Israeli economy "is still moving away from a recovery path" amid "rising military and social expenditures, a declining revenue base, and the continued widening of the deficit to levels that threaten overall financial stability."