Israel's budget deficit could reach 5% of gross domestic product in 2025, Reuters reported.
That's above the government's target but below last year's 6.9% and a level that could boost the country's credit rating after a series of downgrades, a senior finance ministry official said.
The 2024 deficit was the highest since it topped 11% of GDP in 2020. amid a surge in spending and a drop in tax revenues as a result of the COVID pandemic.
Yali Rotenberg, Israel's chief accountant, said he expects the deficit this year to be between 4.4% and 4.9% of GDP - against a target of 4.4% set in the 2025 draft budget, which still needs final parliamentary approval.
Last week, the Bank of Israel forecast that this year's deficit would be 4.7% of GDP.
"It is very important that we stick to the deficit plan. "It is very important to adopt a budget that reflects a fiscal contraction of 2%," Rotenberg stressed at a briefing to discuss the 2024 budget data.
"This would be a very important message to the capital markets and would stabilize the debt-to-GDP ratio and improve the credit rating, which is very important".
All three major credit rating agencies downgraded Israel's rating last year due to the high costs of financing Israel's wars against the Palestinian group "Hamas" in Gaza and "Hezbollah" in Lebanon following Hamas attacks. on October 7, 2023.
Lawmakers narrowly approved the budget on first reading, but it must be approved in two more votes to become law.
Until a budget is approved in 2025, last year's budget will be divided into 12 parts, with 1/12 distributed each month.
Failure to approve the budget by March 31 will trigger new elections.
Military spending in 2024 was about 100 billion shekels ($27 billion), and a total of 125 billion since the start of the war.
Israel's budget deficit was 4.1% of GDP in 2023. It rose to 8.5% of GDP in the 12 months ending in September 2024 before falling in the fourth quarter due to - as Rotenberg points out - stronger economic activity.
While spending jumped 20% in 2024 to 621 billion shekels, revenue rose 10.5% to 485 billion, leading to a deficit of 136 billion shekels.
In December, the deficit was 19.2 billion shekels, and its value of 6.9% of GDP was the lowest since last March and below November's level of 7.7%.
Tax revenue grew by 27.6% in December compared to December 2023 and increased by 7.3% in 2024 overall.