Israel swings to budget deficit in March as state revenue from taxes falls

For the first time in nine months, Israel posts a budget deficit of NIS 300 million ($82 million), or 0.01% of GDP in March over the prior 12 months, as state revenue from taxes declined, according to preliminary figures released by the country’s Finance Ministry today.

The Finance Ministry says the deficit is fueled by a downward trend in state revenues following the “exceptionally high increase in state revenues” in 2022. In March, state revenues declined 4.7% to NIS 40.8 billion versus NIS 42.8 billion during the same month last year. Government expenditure stood at NIS 43.5 billion in March compared with the NIS 41.9 billion in March 2022.

Although the March deficit is minimal in terms of the percentage of GDP, it comes during a period when Israel’s robust economic growth of more than 6% in 2022 is already expected to moderate to slow to below 3% this year and senior Finance Ministry officials have warned that the government’s proposed judicial overhaul could result in a severe loss of tax revenue and do “very significant harm” to the economy.