Deficit drops to nearly zero for the first time in 14 years

Israel’s budget deficit has dropped to nearly zero as government revenues increase and expenditures fall amid the ongoing rebound from the coronavirus pandemic.

The Finance Ministry said Thursday that the deficit as a percentage of GDP was 0.04% for the previous 12 months, including May.

The ministry said the deficit was essentially “zero” for the first time since 2008. The target deficit for the year is 3.9% of GDP.

May was the fifth consecutive month that Israel had a budget surplus, with the surplus since the start of the year adding up to NIS 3.33 billion ($968 million).

The surplus in May was NIS 1.4 billion ($407 million).

The ministry reported “significant growth” in revenue as a percentage of GDP, alongside a drop in spending, as pandemic-era economic assistance programs have been scaled back and unemployment remains low.

State revenue for the first five months of the year was NIS 206.3 billion ($60 billion), representing a 25% increase over the same period last year.

Government expenditures were NIS 173 billion ($50.3 billion), representing a 13.2% drop over last year. Economic assistance programs amounted to NIS 3.6 billion ($1 billion) in the first five months of the year.

Israel’s unemployment rate was 3.4% in the first half of May, the Central Bureau of Statistics reported. In the first half of April, unemployment was 2.9%, the lowest rate in 50 years.

Israel’s budget deficit for the year 2020 was NIS 160.3 billion ($50.4 billion), or 11.7 percent of its GDP, the highest ever, due to the severe economic effects of the pandemic. Percentage-wise, the deficit was one of the highest in the world.

During the early months of the pandemic, unemployment hit a record high, with nearly a quarter of the workforce out of a job.

Last year, the economy grew by 8.1%, surpassing previous forecasts and marking the highest financial growth rate recorded in Israel in 21 years. The economy contracted by 1.6% in the first quarter of this year amid a global downturn.

Avigdor Liberman took the helm of the Finance Ministry at this time last year, when Prime Minister Naftali Bennett’s government took power.

The coalition passed a state budget in 2021 after a series of inconclusive elections and government dysfunction stalled the crucial legislation for over three years.

The government appears to be on its way to a collapse as it lurches from one crisis to another since losing its majority in April, representing a risk to economic activity.