Israel's Government Deficit Hits 3.2% of GDP as Spending Surges Ahead

At the end of September, the government deficit stood at 3.2% of GDP, meaning the government spent 71.8 billion shekels more than it took in over the past 12 months. For September alone, the deficit reached approximately 10 billion shekels. Looking at the year-to-date period, the picture appears positive: the cumulative deficit is only 29.5 billion shekels, about a quarter of the permitted deficit for 2026, which is legally set at 4.9% of GDP, three-quarters of the way through the year.

However, this optimism requires qualification. First, government spending early in the year was heavily restrained because the state budget was only approved at the end of March. Furthermore, toward the end of the year, especially in December, government expenditures tend to surge, meaning major outlays may still lie ahead. Second, the composition of spending so far warrants close examination. According to Accountant General data, the defense establishment spent roughly 139 billion shekels out of its allocated 170 billion shekels since the beginning of the year—about 82% of its budget, a pace slightly ahead of the year's progression. Conversely, civilian ministries spent only 288 billion shekels out of 431 billion shekels allocated, or roughly 67%.

State revenues also impact the deficit: the higher the revenues, the smaller the deficit. State revenues in September reached 47 billion shekels, totaling approximately 457 billion shekels since the beginning of the year, representing about 78% of the Chief Economist's updated revenue forecast of roughly 587 billion shekels. Tax revenues show a nominal significant increase of 13.3% in the first nine months of 2026 compared to the same period in 2025. Yet here too, the data must be approached with caution.