Budget deficit narrows in April on stronger-than-expected tax revenues

ISRAEL - In Brief 12 May 2026 by Sani Ziv
The budget deficit over the past 12 months narrowed to 3.8% of the GDP in April, down from 4.2% in March and 4.7% in February. The better-than-expected figure was driven by stronger tax revenues, which rose by 5% year-on-year in real terms. Direct and indirect tax revenues both increased by around 6%, while fee revenues declined. In January-April, total tax revenues increased by 7% compared with the same period last year. Direct tax revenues rose by 11%, mainly due to one-off capital-gains revenues from the sale of Wiz, which have contributed around NIS 8 billion so far. By contrast, indirect taxes, mainly VAT, increased by only 2.9%, pointing to more moderate activity. The Ministry of Finance had expected weaker April tax revenues due to the intense fighting in March. War-related expenditure has not yet been fully reflected in the budget, as government expenditure is recorded on a cash basis. As a result, total government spending declined by 10% in April compared with April last year and remained almost unchanged in January-April compared with the same period last year. Overall, these are positive fiscal data, supporting the government’s deficit target, mainly due to tax revenues exceeding the original budget assumptions.In the chart below, revenues, expenditures, and the fiscal deficit are shown as a percentage of GDP. The gap between expenditures and revenues remains wide, although it has narrowed somewhat in recent months. Budget deficit, expenditure, and revenues Source: Ministry of Finance, Accountant General Department Looking ahead: Despite the positive data, we expect the fiscal deficit to reach around 5.5%-6.0% of GDP this year, above the official target of ...

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