Budget deficit down to 4.7% of GDP in 2025

Israel’s budget deficit has narrowed to 4.7 percent of gross domestic product in 2025, below the government’s forecast, as a raft of tax hikes helped lift state revenue, according to preliminary figures released by the Finance Ministry.

The government’s annual deficit target set for all of 2025 was 5.2%. In 2024, Israel recorded a deficit of 6.8% as defense spending on the war with the Hamas terror group ballooned.

Israel posted a deficit of NIS 98.6 billion ($31.3 billion) in 2025, versus NIS 136.2 billion in 2024 and NIS 77.1 billion a year earlier.

Government expenditure in 2025 increased 4.8% to about NIS 650.5 billion, from some NIS 620.5 billion a year earlier. War spending in 2025 amounted to NIS 78 billion and included civilian and military expenses. Cumulative costs of the two-year war with Hamas in Gaza was estimated at almost NIS 200 billion, of which about NIS 164 billion was defense expenditure, and the remainder civilian expenses.

State revenue jumped 13.8% to NIS 551.9 billion in 2025 from NIS 484.9 billion in 2024, bolstered by an increase in tax income.

Income from tax revenue rose by more than 10% in 2025 year-on-year after a series of tax hikes came into effect at the beginning of last year, according to figures by the Israel Tax Authority.