Israel's Budget Deficit Dropped in January Due to Frozen Spending

Israel has not yet approved a state budget for 2020 because of the ongoing political deadlock

Israeli banknotes, November 22, 2017.
Olivier Fitoussi

Israel’s budget deficit dropped to 3.2% of GDP in January, versus 3.7% in December, the Finance Ministry said on Wednesday evening.

The figures refer to the previous 12 months starting on the month being referenced.

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The smaller deficit is because January 2020 revenues were higher than expenditures, which by law were limited to one-twelfth of the total 2019 budget. This is because Israel has not yet approved a state budget for 2020, due to the political deadlock.

As a result, the government is forced to operate on the last approved budget.

In January, Israel had excess revenues – from taxation and other sources of government revenue – of 5.9 billion shekels.

In January 2019, by comparison, Israel had an unusually large deficit of 800 million shekels.

Israel’s deficit target is 3% of GDP. The last time it hit that level was December 2018.

Deficit figures for 2019 were generally higher, peaking at 3.9% in June. The state ultimately spent 52.2 billion shekels for that year, 12 billion more than the treasury had planned, as both tax revenues fell short and spending exceeded the target.

However, tax revenues have stabilized and even increased over the past few months. In December 2019 alone, tax collections grew to 27.3 billion shekels, up from 25.7 billion a year earlier.