Strong tax revenues keep 2025 deficit on target near 5% of GDP

ISRAEL - In Brief 17 Oct 2025 by Sani Ziv
The Ministry of Finance reported a fiscal deficit of NIS 9.5 billion ($2.9 billion) in September, with the trailing 12-month deficit steady at 4.7% of GDP, unchanged from August. This marks a significant improvement from the 8.5% peak recorded in September 2024. Revenues in September totaled NIS 46.5 billion, up 10.2% year-on-year. In uniform tax rates that is, after adjusting for one-off factors such as legislative changes, early vehicle purchases, exceptional revenues, and deferred tax payments, direct tax revenues rose by about 12%, supported by strong corporate profitability, while indirect tax revenues declined by roughly 4%, likely due to lower import activity and fewer working days during the month. Year-to-date, tax revenues reached NIS 414.1 billion, reflecting 77% of the updated annual forecast (NIS 538.6 billion). If the current pace continues, total revenues for 2025 are expected to reach NIS 545-550 billion, implying an upside of roughly NIS 10 billion relative to the official revised forecast. Government expenditure stood at around NIS 470 billion, up 4.4% year-on-year, driven mainly by higher defense spending and social transfers. At the current pace, total expenditures are projected to reach NIS 645-650 billion by year-end, exceeding the revised plan (NIS 620 billion) by 2-3%. The Ministry of Finance’s official revised deficit target for 2025 stands at 5.2% of GDP. Based on current revenue and expenditure trends, we expect the 2025 fiscal deficit to end broadly in line with the official target around 5% of GDP, as strong tax collection continues to offset high government spending. Looking ahead, the end of the war could further reduce defense outlays, l...

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