MoF releases optimistic GDP forecast in 2025, as basis for tax revenue forecast in the budget

ISRAEL - In Brief 30 Oct 2024 by Jonathan Katz
The Ministry of Finance expects growth of 4.3 percent in 2025 (0.4 percent in 2024), assuming an end to the fighting at the current intensity by the end of the year, and a gradual recovery in 2025. This forecast is more optimistic than that of the Bank of Israel, 3.8 percent, ours (3.4 percent), and of the IMF (2.7 percent). The inflation forecast for 2025 is 2.9 percent, and 3.8 percent in 2024 (a reasonable forecast in our assessment). In a more pessimistic scenario of a slower recovery during 2025, the Ministry of Finance expects growth of 3.4 percent. It is important to remember that the Ministry of Finance's GDP forecast serves as the basis for the forecast of tax revenues in the 2025 budget, so that a slightly "rosy" forecast reduces the need to make more significant fiscal adjustments in order to aim for a deficit of 4 percent of GDP. According to our assessment, the deficit in 2025 is expected to reach 5.0–5.5 percent of GDP following 7.4% in 2024.

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