Israeli Budget Deficit Shows Moderate Decline in May 2025

The accumulated budget deficit of Israel showed a moderate decline in May 2025, reaching 5% of GDP, down from 5.1% in April. This marks the eighth consecutive month of declining deficit figures, however, the trend nearly reversed this time. A significant dividend of 1.6 billion shekels paid by Israel Aerospace Industries largely separated a potential deficit increase from a further decline.

Government Financial Overview

According to the Accountant General in the Ministry of Finance, Yaheli Rothenberg, the overall budget deficit has improved slightly compared to the previous year. Nevertheless, May itself recorded a deficit of 8.6 billion shekels, primarily due to a higher deficit in May of the previous year. Since the beginning of 2025, the accumulated deficit stands at 15.9 billion shekels.

The original assumption of the Ministry of Finance was that the deficit would continue to decline until the last quarter of the fiscal year, eventually stabilizing around the projected deficit of 4.9% as outlined in the state budget for 2025. However, the recent escalation of conflict in Gaza and increased military mobilization pressures the deficit upward. Prolonged conflict in the coming months is anticipated to significantly raise defense expenditures beyond what was budgeted.

Revenue and Expenditure Trends

Despite these challenges, a robust stream of state revenue continued in May, helping to keep the deficit under control. The state’s revenues for last month totaled 44.8 billion shekels, representing a nominal increase of 800 million shekels compared to May of the previous year. However, taking into account tax deferrals that inflated previous revenue figures, the real increase in revenues is estimated at approximately 5.6 billion shekels.

On the expenditure side, the government disbursed 53.4 billion shekels in May, slightly decreasing by about 700 million shekels compared to the same month last year. Year-to-date expenses total 256.2 billion shekels, compared to 249.3 billion shekels during the same period last year, indicating a growth of 2.8%. This increase occurs at a time when the original budgetary plan anticipated stabilization or even slight reductions in government expenditure.

In summary, while the Israeli government is experiencing a slight decline in its budget deficit, external factors and ongoing conflict may present significant challenges ahead, requiring careful financial management to navigate the economic landscape