Israel’s budget deficit fell to 0.04% of gross domestic product in May over the prior 12 months, its lowest level in 14 years, from 0.6% of GDP in April, the Finance Ministry said on Thursday.
Israel has a deficit target for 2022 of 3.9% of GDP.
Helped by a 20% annual rise in tax revenue in May amid a continuation of an economic rebound from the COVID crisis, Israel posted a budget surplus of 1.4 billion shekels ($420 million) for the month, bringing the surplus to 33.3 billion shekels over the first five months of 2022 and lowering the deficit as measured over 12 months.
The deficit was its lowest level since January 2008, the ministry said. It had reached nearly 12% of GDP in early 2021 due to steep state spending to help Israel’s economy cope with the virus.
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It was earlier reported that, Israeli Finance Minister Avigdor Lieberman said on Tuesday the country’s budget deficit likely fell to between 1.5% and 1.6% of gross domestic product in March, and that he intends to cut petrol taxes due to spiking fuel costs.
The ministry is expected to issue official budget data on Sunday. In February, the deficit was 2.2% of GDP measured over the prior 12 months and a year ago it was nearly 12% of GDP, amid hefty spending to cope with the COVID-19 crisis.The deficit has gradually fallen on an economic rebound that has sent tax income sharply higher.
Lieberman told reporters that while the process may take time, he plans to reduce Israel’s “blu” petrol excise tax by a half shekel from a current level of 3.13 shekels ($0.98) per litre. The blu tax accounts for 42% of total petrol prices, which rose to 7.44 shekels per litre at the start of April.
Israel’s parliamentary finance committee still needs to approve the tax reduction, which Lieberman said was possible due to a stabilisation of global oil prices.
Lieberman, under pressure to act to rein in a jump in Israel’s cost of living, noted that the loss to state coffers from the lower excise tax would be 800 million shekels ($250 million) over three months.
Israel’s economy grew 8.2% in 2021, while inflation has reached a more-than decade high of 3.5%, likely leading the Bank of Israel to embark on a rate hike cycle next week.
When asked about the likelihood of higher interest rates, Lieberman declined to comment, citing the central bank’s independence.
