Fiscal deficit expands on rapid expenditure growth

ISRAEL - In Brief 10 May 2024 by Jonathan Katz
The fiscal deficit in the LTM rose to 7% GDP in April from 6.2% in March, but excluding the seasonal delay in revenues, the deficit stands at 6.7%. Spending is up 36% y/y in Jan-April while revenues are down 2.2% (nominal). We note that expenditure not related to the war is up 11.7%, which we see as expansionary and inflationary. The allocated expenditure growth path calls for a more moderate increase of around 5%, but the MoF has explained part of this as due to the low base effect from 2023 (due to the delay of fiscal approval). The good news comes from the revenue side which remained strong in April (according to the MoF), following an excess tax revenue collection of 15bn ILS in Q124. This is due, in part, to strong private consumption. So, at the moment it appears that excess revenues are likely to offset excess expenditure. The 6.6% fiscal target (or close to that) still appears credible, assuming there is no major escalation in the conflict (in the North especially).

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