Israel’s budget deficit worsens in October due to Gaza escalation

Israel Economy, Tel Aviv, Financial District

Israel ran a budget deficit of 22.9 billion shekels ($6 billion) in October, according to official data from the Finance Ministry.

The ministry attributed the shortfall to overspending to finance the war with the Palestinian Hamas movement in the Gaza Strip.

The deficit as a percentage of GDP widened to 2.6 percent in the twelve months to October, compared with 1.5 percent in September, he added.

The ministry pointed out that revenue fell 15.2 percent last month due to tax deferrals and lower social security income as a result of the war that broke out on October 7.

The deficit was 4.6 billion shekels in September, compared to 3.1 billion shekels in October last year, representing a more than 7-fold increase in the deficit.

On the other hand, the number of tourists in Israel dropped by 73 percent this October due to the war on Gaza.

According to data from the Israel Bureau of Statistics, nearly 99,000 visitors, most of them classified as tourists, visited Israel in October, up from 369,000 in the same month last year and about 485,000 in the same period in 2019 before the coronavirus pandemic. .

According to the “Secret Flights” report, 454,000 Israelis left the country last month, and flights to and from Ben Gurion International Airport have dropped by an average of 80 percent since the outbreak of war.

Meanwhile, Israeli economic newspaper Calcalist reported Sunday that the cost of Israel’s war against Hamas in the Gaza Strip could rise to 200 billion shekels ($51 billion), citing preliminary figures from the Finance Ministry.

Estimates of costs equivalent to 10 percent of GDP are based on the likelihood that the war will continue for 8 to 12 months, with the matter confined to Gaza without the full participation of Lebanese Hezbollah. , Iran, or Yemen, as well as about 350,000 displaced Israelis who quickly return and will soon be recruited into the reserve forces.

The cost of revenue losses will be between another 40 and 60 billion shekels, and between 17 and 20 billion shekels in compensation to Israeli companies and 10 and 20 billion shekels for rehabilitation.

Finance Minister Bezalel Smodrich earlier said the Israeli government was preparing an economic aid package for victims of Palestinian attacks that would be “bigger and broader” than during the Covid-19 pandemic.

Prime Minister Benjamin Netanyahu said Thursday that the government is committed to helping all victims.

He added: “My orders are clear: open the taps and pay the money to those who need it without giving out numbers.

He added: “Over the last decade, we have built a very strong economy here, as we did during the Covid crisis, and even if war imposes economic losses on us, as it does now, we will pay them without hesitation. “

Following the outbreak of war, Standard & Poor’s lowered its outlook for Israel’s rating to “negative”, while Moody’s and Fitch put Israel’s ratings on review for a possible downgrade.

Because of the war, Israel’s economy would suffer a deep depression