Fiscal deficit target in 2024 appears credible

ISRAEL - In Brief 04 Jun 2024 by Jonathan Katz
Fiscal deficit target in 2024 appears credible As we had expected, the MOF just published a revised revenue forecast for 2024, which is 16.2 bl ILS above the original fiscal assumption. This takes into account revenues for the first five months and a conservative estimate for the rest of the year. This will offset (mostly) the expected overshooting of expenditure of around 25bn ILS, although we could see some additional fiscal adjustments in the second half of this year, such as pushing the VAT hike forward from January 2025 to July or August 24. Much uncertainty remains regarding the level of hostilities, but we expect a deficit of around 7% this year slightly above the 6.6% target but lower than many other forecasts. The MoF published their deficit forecast for the coming years (2025-2027) assuming no fiscal adjustments are implemented (the “Numerator”). They expect a fiscal deficit of 5.2% GDP in 2025, assuming GDP growth of 4.6% (following 1.9% in 2024). Nevertheless, we are likely to see fiscal adjustments of some 1% of GDP (20bn ILS) in order to target the deficit at around 4% GDP in 2025, with a downward deficit target path in subsequent years. If hostilities cease (the big uncertainty), Israel should witness a growth rebound which will put the fiscal posture in an improving trend.

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