Financial Times: Israel’s fiscal deficit expected to widen economy as military spending rises

The British Financial Times reported that Israel Next year, it will triple its fiscal deficit to pay for military spending, which has risen sharply from about 5% to 7% to 8% of GDP.

The newspaper addressed expectations that fiscal deficits will accelerate next year, as well as rising military spending following the war. Gaza Strip.

The newspaper said investors in Israeli bonds require an additional risk premium as 10-year bond yields have risen since September last year.

The newspaper recently reported that Israel In recent weeks, it has borrowed $6 billion in privately negotiated deals to help finance its war… Gaza Strip.

The newspaper noted at the time that Tel Aviv had to pay unusually high borrowing costs to complete the deals.

Previously, S&P Global downgraded Israel’s economic outlook from stable to negative due to growing risks to the Israeli economy due to aggression in the Gaza Strip, and warned of the negative impact of the continued war.

Shmuel Abramson, chief economist at the Israeli Ministry of Finance, said that the extent of damage and losses will expand, considering that the Israeli economy has been struggling under the weight of the aggression in the Gaza Strip since October 7 last year, And he said that people are worried that if a full-scale war breaks out between the northern front and Hezbollah, its losses will be more serious.

According to Abramson’s estimates, reported yesterday Monday by the economic newspaper “De Marker”, uncertainty and uncertainty over the course of the war in Gaza and the continued escalation of the Lebanese front are factors that may affect economic activity and cause multifaceted consequences for the Israeli economy. damage.

Abramson believes that every month of war could lead to losses gross domestic product This amounts to 8 to 9 billion shekels ($2.1 to 2.4 billion), as well as future economic and labor market losses.

Faced with the pressure of war costs, Israeli Prime Minister Netanyahu was recently forced to approve the Ministry of Finance planModify the national budget This year comes with dealing with the ongoing war in Gaza.

The amendment provides for an expansion of the budget framework and an increase in the deficit by 9%. The Bank of Israel opposed it and said that the Finance Minister would not reduce allocations to the coalition government.

The 2023 budget amendment proposed by Finance Minister Bezal Smotrich involves an increase of 31 billion shekels ($8.3 billion), including 22 billion shekels in defense spending and 9 billion in civilian spending, in addition to reductions 4 billion shekels were spent.