Israel's Fiscal Deficit Falls to 3.3% Amid Rising Tax Revenues by July

Israel's fiscal deficit for the 12 months ending in July stood at 3.3% of GDP, significantly below the year-end target of 4.9%, according to the Accountant General Michal Abadi-Boiangiu. The monthly deficit in July was 4.8 billion shekels, with a cumulative deficit of 72.9 billion shekels over the past year. Government revenues in July reached 55 billion shekels, totaling 328 billion shekels since the start of the year, an 11% increase compared to the same period last year. Meanwhile, government expenditures in July were nearly 60 billion shekels, with total spending of 373 billion shekels year-to-date, marking a 3.5% rise from the previous year.

Despite the positive deficit figures, officials caution that it is too early to confirm a favorable year-end outcome, as the early months featured a continuation budget with lower spending, which is expected to increase steadily. By the end of July, government spending was at 53% of the planned budget. Civil ministries are underspending by 1.3% compared to last year, while defense ministries have increased spending by 12.6%. Overall, government ministries were expected to increase spending by 7.2% year-over-year but have only increased by 2.9%, driven mainly by higher defense expenditures.

The Chief Economist's office reported that real tax revenues in July 2026 rose by 12% compared to July 2025. Direct tax collections increased by 14%, indirect taxes by 9%, and fee collections by 20%. The rise in direct taxes is attributed mainly to higher income from payroll deductions and self-employed income tax. The increase in indirect taxes is largely due to a significant rise in consumption during May and June 2026 compared to the same months in 2025, including VAT payments on a high-value transaction.