Israel's public debt surges to 69% of GDP in 2024. Economic implications and what’s ahead

ISRAEL - In Brief 23 Jan 2025 by Sani Ziv
Israel's Ministry of Finance reported a sharp rise in the public debt-to-GDP ratio to 69% in 2024, up from 61.3% in 2023 and 60.3% in 2022. Government debt-to-GDP climbed to 67.6%, with total government debt reaching NIS 1,329.3 billion by the end of 2024, compared to NIS 1,127.4 billion in 2023. The increase is mainly due to a large budget deficit of 6.9% of GDP, driven by soaring military and civilian expenditures amid the ongoing war, with defense spending rising to NIS 169 billion from NIS 98 billion in 2023. Additional factors, including inflation, higher interest rates, and exchange-rate fluctuations, contributed approximately NIS 30 billion to the debt stock. Total government debt reached NIS 1,329.3 billion by the end of 2024, compared to NIS 1,127.4 billion in 2023. Historical context Since 1995, Israel's debt-to-GDP ratio has significantly improved, declining from 98% in 1990 to 60% in 2019. Despite a peak of 71.7% in 2020 due to the COVID-19 pandemic, it dropped to 62% in 2022, driven by rapid GDP growth of 9.3% and 6.5% in 2021 and 2022. While Israel's 2024 debt-to-GDP ratio remains relatively low compared to OECD countries, it ranks higher within its benchmark peer group, where the median is about 52%. The following chart illustrates the trajectory of Israel's debt-to-GDP ratio (right axis) alongside total public debt in NIS billion (left axis). It highlights the sharp decline in the debt ratio between 1990 and 2019, its temporary increase during the COVID-19 pandemic, and its subsequent fall after the recovery period. Israel’s Public Debt (% of GDP in the right axis and NIS billon in the left axis) Outlook for 2025 In 2025, the government's budget deficit...

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