Israel posts first budget deficit in nine months

The State of Israel in March posted its first budget deficit in nine months, amounting to 300 million shekels ($82 million USD).

The deficit, constituting 0.01% of the nation’s GDP, was attributed to shrinking state revenues from taxes, according to newly released statistics from Israel's Ministry of Finance.

The Israeli government’s revenues fell to 120 billion shekels (approximately $33 billion USD) since the beginning of the year, constituting a 4.4% drop compared to the same period in 2022. During these same three months, government spending grew by 4.4%, amounting to 106 billion shekels ($29 billion USD).

The state’s direct tax revenues fell 8% in 2023 compared to 2022. The downturn in the Israeli housing market was reportedly a major contributing factor, with real estate taxes falling 43% during this period. In addition, there was a 20% fall in VAT collection in March compared to the same period in 2022.

The Israeli export-oriented economy is generally considered robust, with the international credit reporting agency, Moody’s Investors Service, remarking on the Israeli economy’s growth over the last decade.

“The Israeli economy has grown at a rapid rate over the past several years, averaging 4.1% over the decade to 2022, helped to an important extent by the globally competitive and increasingly diversified high-tech industries,” Moody’s said.

Nevertheless, the agency also downgraded the Israeli economy’s credit outlook, from positive to stable, warning that Israeli institutions were weakening as a consequence of the Netanyahu government’s ongoing judicial reforms.

“While mass protests have led the government to pause the legislation and seek dialogue with the opposition, the manner in which the government has attempted to implement a wide-ranging reform without seeking broad consensus points to a weakening of institutional strength and policy predictability,” stated the agency.