Israeli Ministry of Finance data showed that the financial deficit reduced 5.3% of GDP in February 2025, compared to 5.8% in January, but it is still higher than the goal set by the government in its budget for 2025, which reached 5% of the gross domestic product, although the budget has not been completely approved yet, according to what Calcalist newspaper reported.
During the past 12 months, the cumulative deficit amounted to about 108 billion shekels (29.5 billion dollars) after it was at about 115 billion shekels ($ 31.4 billion) in January. In February, the monthly deficit recorded about 6.1 billion shekels (1.67 billion dollars), which is half of the level registered during the same month of 2024, which was a year that witnessed an intense war that led to a sharp financial deficit.
The data indicates that the tax revenue in February 2025 decreased by 38% compared to Penayer, as it amounted to about 39 billion shekels (10.6 billion dollars), which is just less than the annual average last year, which amounted to about 40 billion shekels (10.9 billion dollars).
The finance attributed this decrease to a sharp decline in indirect taxes by 6%, after January witnessed an exceptional collection of about 63 billion shekels ($ 17.2 billion) as a result of wide tax changes that included increasing value -added tax and car taxes.
Government spending under pressure
The government expenditures in February – according to the newspaper – reached about 46 billion shekels (12.5 billion dollars), which raised the total government spending since the beginning of the year to about 86 billion shekels (23.4 billion dollars) compared to the maximum set in the temporary budget of about 87.3 billion shekels (23.7 billion dollars). This reflects a 5% decrease compared to February 2024, where there was an accredited expansion budget.
Despite the decrease in public expenditures, government spending in February witnessed a 14% increase compared to Paynire. The government benefited from reducing spending in some sectors to pay debts worth about 9 billion shekels ($ 2.45 billion).
The slowdown of the Israeli economy
According to the data of the Israeli Central Statistics Department, the Israeli economy recorded a weak growth of 0.9% in 2024, which is less than the initial estimates of 1%, while the growth rate for the fourth quarter was modified to 2% after the previous estimate was 2.5%, according to Reuters.
The growth rate for the third quarter was reduced to 5% instead of 5.3%. The Statistics Department stated that the gross domestic product decreased by 0.4% based on the per capita share in 2024, which reflects the weakness of the general economic performance according to the same source.
Gaza and southern Lebanon struck the economy
The war launched by Israel against the Gaza Strip since October 2023, and the military escalation with Hezbollah in southern Lebanon, affected the entire Israeli economy, which led to an increase in military expenses and security costs, and the presence of an economic uncertainty.
The ceasefire came into force in Gaza on January 19, 2025, while a truce was reached with Hezbollah on November 27, 2024, but the economic repercussions of the war are still pressing public finance and Israeli economic growth, as military spending was a major burden on the public budget during the past year.
Calcalist states that, despite the great economic difficulties, the Central Statistics Department expects that the growth rate this year will reach about 4%, but it depends heavily on the ability of the Israeli government to restore financial balance, stimulate growth, and reduce the increasing financial deficit.
However, the challenges still exist, especially with the low investor confidence, the slowdown in foreign trade, and the continued pressure on the business sector, which may make this goal more difficult than the government expects.
Also, any new security escalation may lead to more economic decline, which enhances the state of financial instability in Israel, according to experts.
