May 29, 2025 3:24 pm
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Israel’s Budget Deficit Projected to Approach 5% of GDP in 2025, Says Finance Ministry Official

New Delhi, January 13, 2025 – Israel’s budget deficit could approach 5% of gross domestic product (GDP) in 2025, exceeding the government’s target but remaining below last year’s 6.9%, according to a senior finance ministry official. This level could potentially boost the country’s credit rating after a series of downgrades.

In 2024, the deficit reached its highest level since 2020, topping 11% of GDP amid increased spending and decreased tax revenue due to the COVID-19 pandemic. Yali Rothenberg, Israel’s Accountant General, anticipates the deficit this year to be between 4.4% and 4.9% of GDP, compared to the 4.4% target set in the 2025 budget draft, which still requires final parliamentary approval. The Bank of Israel recently projected the deficit for this year to be 4.7% of GDP.

“It’s very important to stick to the deficit plan. It’s very important to pass the budget that reflects a fiscal contraction of two percentage points,” Rothenberg stated during a briefing on the 2024 budget data. He emphasized that achieving this target would send a crucial message to capital markets, stabilize the debt-to-GDP ratio, and improve Israel’s credit rating.

All three major credit rating agencies cut Israel’s sovereign rating last year due to the significant cost of funding the wars against Palestinian Islamist group Hamas in Gaza and Hezbollah in Lebanon, following Hamas’ attacks on Israel on October 7, 2023. Lawmakers narrowly approved the budget in an initial vote, but it still requires two more votes to become law.

Until a budget is approved in 2025, the 2024 budget will be divided into 12 parts, with 1/12 allocated each month. Failure to approve the budget by March 31 would trigger new elections.

In 2024, war expenses totaled approximately 100 billion shekels ($27 billion) and reached 125 billion since the conflict began. Israel’s budget deficit was 4.1% of GDP in 2023 and rose as high as 8.5% of GDP in the 12 months ending September 2024 before easing in the fourth quarter due to stronger economic activity.

Spending increased by 20% in 2024 to 621 billion shekels, while revenue rose by 10.5% to 485 billion shekels, resulting in a deficit of 136 billion shekels. In December, the deficit was 19.2 billion shekels, with a 6.9% of GDP figure, the lowest since last March and below November’s level of 7.7%. Tax revenue rose by 27.6% in December compared to December 2023 and increased by 7.3% in 2024 as a whole.


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