The budget deficit (excluding credit) narrowed to NIS 30.2bn (US$8.4bn) in 2010, equivalent to 3.7% of GDP. This was well below both the 2009 outturn of 5.2% of GDP and the original 2010 budget ceiling of 5.5%. Buoyant tax revenue-up by 7.5% in real terms-contributed to last year's better than expected performance, and is likely to remain strong over the forecast period, given the positive outlook for economic growth. Under the two-year budget for 2011-12, growth in real spending has been capped at 2.7% a year. However, additional spending constraints have recently been imposed on most ministries, in order to finance higher transportation subsidies (aimed at quelling popular unrest). The government is still determined to reduce the fiscal deficit to a maximum of 3% of GDP in 2011 and 2% of GDP in 2012. A key risk is that defence spending could escalate, on the back of the recent political turmoil in the region. Nonetheless, by the end of the forecast period in 2015, we expect the fiscal account to have moved into overall surplus, helped by rising revenue from oil.