Operation Protective Edge has inflated the July deficit, which at NIS 2.3 billion is nearly six times the deficit of July 2013. The 12-month deficit, which is a better measure of overall fiscal health, increased to 2.7 percent of GDP from 2.5% the previous month.

For one, revenues were lower than usual because businesses in the South were given an extra month to pay their taxes, which means there should be a bump in August revenues as well. Spending was also up 3.8% over last year, in part because the government pushed to pay suppliers in the South more quickly to help their cash flow during the security-related business lull.

The July numbers reflect mainly early actions to help businesses, while many of the costs of the operation will hit later on as money is set aside to replenish the Defense Ministry and the economic effect of the security situation on businesses sets in.

Direct damage from rockets is estimated at about NIS 50 million, while indirect damage to businesses will cost the government between NIS 750m. and NIS 1b. The Defense Ministry has reportedly requested an additional NIS 6b.-NIS 8b. to cover the one-time costs of the operation, but it also wants a general budget increase of NIS 11b. for 2015.

Finance Minister Yair Lapid has said that the 2014 budget, with its 3% deficit target, could absorb the costs of the war. Indeed, the 2014 deficit from January through July was NIS 6.4b., significantly lower than the NIS 10.6b.

deficit that had accumulated by the same time in 2013.

Lapid, who is set to present the 2015 budget in September, has vowed not to raise taxes. He said he will likely keep the 2015 deficit target at 3% instead of allowing it to fall, as planned, to 2.5%.

One of economic sectors hardest hit by the rocket fire from Gaza has been tourism, which in July sank to its lowest level in seven years.

According to the Central Bureau of Statistics, 218,000 visitors entered Israel in July, a 26% drop from the previous year.

The question remains how quickly the sector will bounce back; 2014 was on course to be a record-setting year, and even with the July drop in tourists there was a 13% increase over the first seven months of the 2013.

“It is still too early to tell the economic effects of the security situation, but the effect of security events of similar magnitude in the past decade turned out to be a moderate macroeconomic impact, up to about 0.5 percent of GDP [in the Second Lebanon War],” the Bank of Israel’s monetary committee said in its monthly interest-rate review, released Monday.

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