Israel’s April budget data support deficit target; bond issuance pace expected to slow

ISRAEL - In Brief 13 May 2025 by Sani Ziv

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The Ministry of Finance reported a fiscal deficit of NIS 11.15 billion ($3.145 billion) in April, with the trailing 12-month deficit improving to 5.1% of GDP, down from5.2% in March and a peak of 8.5% in September 2024. The improvement reflects strong tax revenues in January and February—partly due to front-loaded consumption ahead of tax hikes—as well as lower expenditures in Q1, driven by the constraints of the interim budget and a temporary decline in defense spending. Expenditures in April surged to NIS 59.5 billion, up 23% year-on-year, due to higher defense spending, reserve duty grants, and delayed budget execution. Since the beginning of the year, cumulative spending has reached NIS 202.8 billion—up 3.9% year-on-year—compared to a planned decline of 1.6%, with most of the deviation attributed to security-related costs. April revenues reached NIS 48.3 billion, supported by a 6% real increase in VAT collection (net of tax rate effects), pointing to stronger-than-expected consumption. Year-to-date revenues are up 24.5%, though part of the gain reflects a low base in early 2024 (NIS 36.5 billion in April 2024). Implications of the April fiscal data April’s revenue figures were stronger than expected, signaling continued expansion in economic activity. Given the sharp overperformance in tax collection, it is likely that the Ministry of Finance will revise its annual revenue forecast upward by around NIS 10 billion, equivalent to approximately 0.5% of GDP, by mid-year. On the expenditure side, outlays are clearly trending upward following the late approval of the 2025 state budget. If the war in Gaza escalates in the coming months, budget outlays are expected to exce...