Deficit widens to 4.9% GDP. Banks under fire for ₪30B profits. Two Israeli FDA wins.

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Deficit widens to 4.9% GDP. Banks under fire for ₪30B profits. Two Israeli FDA wins.

Re: February 10, 2026 in Israel - and what it all means for investors at home and abroad.

Sophia Tupolev

Feb 10, 2026

Quick takes:

Macro: The fiscal deficit widened to 4.9% in January; State revenues fell 5.4% YoY.
Regulations: The Knesset split the Economic Arrangements Bill; The Finance Committee attacks lenders for ₪30 billion in profits.
Foodtech & Healthcare: Pulsenmore signs a commercial deal in Maryland following FDA clearance; Phytolon secures FDA approval for its natural food coloring.
Services: RGA Services wins a ₪114 million waste management tender.
Executive Moves: Shimrit Kenig (ex-JVP) appointed CEO of Mizrahi-Tefahot Invest.

Macro

The Ministry of Finance released sobering data for January 2026, revealing the toll of the war economy on the state’s balance sheet.

The rolling 12-month deficit ticked up to 4.9% of GDP (₪104.5 billion). While January ended in a surplus of ₪16.9 billion, this was a sharp decline from the ₪22.8 billion surplus recorded in January 2025.

State revenues fell to ₪59.7 billion, a 5.4% drop year-over-year. The decline is driven by a cooling real estate market. Net income from real estate taxation fell 6% in real terms, with purchase tax dropping 5% and appreciation tax (Shevach) falling 7%.

Regulation

The Knesset Finance Committee, led by MK Hanoch Milwidsky, launched a scathing attack on the banking sector today. Lawmakers slammed the banks for generating ₪30 billion in profits on ₪130 billion equity, accusing them of ‘price gouging’ by not rolling over interest rate cuts to consumers fast enough. The Supervisor of Banks noted that 80% of credit is Prime-linked, meaning the recent 0.5% rate cut was passed on immediately. Politicians are threatening to intervene in pricing if the gap between deposit rates and loan rates doesn’t narrow.

In a late-night session, the Knesset Plenum voted (60-56) to split the 2026 Economic Arrangements Bill. The painful fiscal measures (tax hikes, bank taxes) are fast-tracked to pass by the March 31 budget deadline to prevent a government collapse. Structural growth engines, like the credit register for small businesses and fuel market reforms, were stripped out for later debate.

Our take: By splitting the bill, the government is effectively passing the pain (taxes) without the gain (efficiency reforms). This is a recipe for stagflation, driven by political survival rather than economic strategy.

FoodTech & Healthcare

A strong day for Israeli regulatory wins in the US market.

Phytolon, a portfolio company of Millennium Food-Tech (TASE:MIFT), received FDA approval for its fermentation-based natural red food coloring. This aligns with the US push to replace synthetic dyes. Millennium holds 10.6% of Phytolon.

Pulsenmore (TASE:PLSM) signed a commercial agreement with TLC Perinatal in Maryland to deploy its home ultrasound systems. This follows its November FDA clearance. The stock rose 3.8%.

PsyRx (TASE:PSYR) soared 28% after securing a ₪3.5 million investment to fund Phase 2 clinical trials for its central nervous system treatments.

Services

RGA Services (TASE:RGAS), a leader in municipal sanitation, won a tender worth up to ₪114 million over 5 years. Despite the win, the stock dropped 4.8%. Investors may be viewing the annual run-rate (₪22.8 million) as incremental relative to the company’s massive ₪1.65 billion backlog.

Appointments

Mizrahi Tefahot (TASE:MZTF) has appointed Shimrit Kenig as CEO of its investment arm, Mizrahi-Tefahot Invest. Kenig joins from venture capital giant JVP, where she served as Partner and COO. This signals the bank's intent to deepen its ties with the high-tech ecosystem and alternative investments.