Israel’s fiscal deficit widened to 4.7% of GDP in the 12 months to the end of December 2025, from 4.5% at the end of November 2025, the Ministry of Finance reports.
Nevertheless, the fiscal deficit is well below the Ministry of Finance forecast of 5.2% and the 6.8% fiscal deficit at the end of 2024. The fiscal deficit totaled NIS 98.6 billion at the end of 2025, although this is an initial estimate, and the final figure will not be available for several months.
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State revenues in 2025 amounted to NIS 520 billion, up NIS 64 billion from NIS 455 billion in 2024. Half of the increase is attributed to tax increases implemented during the year. Direct taxes totaled about NIS 300 billion.
The report also shows that additional revenues of NIS 20.9 billion were earned from legislative changes and their impact on collection in 2025. The legislative provisions include an additional 2% surtax on capital income – dividends, rent, and capital gains – as well as a reform of the taxation of trapped profits. In addition, the increase in the VAT rate from 17% to 18% likely contributed to higher consumption and increased imports, especially vehicle imports, beyond the effects resulting from changes in the purchase tax on imports.
The war expenses in 2025 are estimated at NIS 78 billion net, and include civilian and military expenses. The cumulative direct cost of the war since its beginning was estimated at NIS 199 billion, of which about NIS 164 billion was defense expenses, and the rest was civilian expenses.
The Ministry of Finance refuses to “celebrate” the 2025 deficit, which is lower than forecast, but still constitutes a very high deficit. The deficit set in the budget proposal for 2026 was initially 3.2%, but on the eve of the government discussion it rose to 3.6% and ended at 3.9%. This is a deficit that will not reduce the debt-to-GDP ratio.
Published by Globes, Israel business news – en.globes.co.il – on January 13, 2026.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2026.
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