Tax revenues decline in November but fiscal surplus maintained YTD

ISRAEL - In Brief 08 Dec 2022 by Jonathan Katz
November’s fiscal deficit was 1.2bn ILS (compared to 0.5bn in Nov 21), and the fiscal surplus reached 0.4% GDP in the last 12 months. Since the beginning of the year the fiscal surplus reached 28.9bn ILS. Tax revenues are up 14.8% y/y in Jan-Nov while non-Covid expenditure rose a modest 5.6%. Regarding tax revenues in November 22 specifically, they were lower than Nov 21 by 10% in real terms, but this is because Nov 21 witnessed unusually high revenues. Compared to Nov 19 (pre-Covid) the level of tax revenues is up 9% annually, over the past three years. According to the MoF, April-Nov witness slower tax revenues (slowing consumption and real estate activity) than the record high level in March, but are basically back to pre-Covid growth pace of 5% annual. We expect to finish the year with a fiscal surplus of 0.7% GDP. Although 2023 will be more challenging due to weaker tax revenues and increased spending, we expect the fiscal deficit to reach 2.7% GDP. The MoF economists are slightly more optimistic as they do not expect an approved budget in place until mid-2023, meaning in the first half of the year spending will be based on the 2022 budget, which will keep the lid on expenditures for a good part of the year.

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