Israel's fiscal deficit narrowed in the twelve months to the end of March 2025, for the sixth consecutive month, to 5.2% of GDP, or NIS 105.5 billion, Ministry of Finance accountant general Yali Rothenberg reported today. In the twelve months to the end of February 2025, the fiscal deficit was 5.3%.
The fiscal deficit in March 2025 itself was NIS 13 billion, down from NIS 14.9 billion in March 2024. In the first quarter of 2025, Israel had a fiscal surplus of NIS 3.7 billion compared with a fiscal deficit of NIS 26.4 billion in the first quarter of 2024, in the early stages of the war.
The improvement in the deficit was measured on both sides of the equation. On the one hand, state revenues have grown impressively, amounting to NIS 147.3 billion in the first quarter of 2025, up 22.1% from the corresponding period of 2024.
However, revenue flowed strongest into the state coffers in the first two months of the year and has moderated since then. This is attributed to the public bringing forward transactions and financial operations to the end of 2024, in order to avoid the tax hikes in the 2025 budget.
March was also the final month without an approved budget, concluding three months lower government spending. The decrease in spending stemmed from the restraining effect of the follow-on budget, which capped expenditure, and a reduction in war spending compared with last year.
With the approval of the new 2025 budget, a certain acceleration in the pace of spending is expected from April onwards, but the expectation is that the deficit will continue its downward trend. Estimates at the Ministry of Finance indicate that the deficit is expected to continue to decline until the last quarter, when it will climb again.
The Ministry of Finance's fiscal deficit target for 2025 budget is 4.9%. The final result may be better if the latest deficit forecast issued by the Bank of Israel yesterday, which was cut to 4.2% of GDP by the end of the year, is correct. The Bank of Israel also forecasts that the deficit will fall to 2.6% of GDP in 2026 - a level that will allow for a declining debt-to-GDP ratio.
Published by Globes, Israel business news - en.globes.co.il - on April 8, 2025.
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