Israel’s Minister of Finance, Yair Lapid: “This is a vote of confidence by the credit rating agency in the economic plan and the new budget. In particular, Moody’s specified the return to fiscal discipline and the integration of new population groups in the labour market as constructive steps that contribute to the strength of the Israeli economy.”
Moody’s, the international credit rating agency, announced on Thursday 15 August that it had re-affirmed Israel’s credit rating, leaving it at a level of A1 with a stable outlook. The release of the rating announcement followed the annual visit of the company’s representatives to Israel last month, during which they met with the Minister of Finance, representatives from the Bank of Israel and other officials from the public and business sectors. This is the first rating announcement since Moody’s raised the country’s rating to A1 in April 2008.
The Minister of Finance, Yair Lapid, said: “This is an additional confirmation by the rating agency of Israel’s robust and dynamic economy, which allows it to grow despite the decline in global demand and in the face of external security threats.”
In their announcement, Moody’s representatives noted that Israel’s credit rating, A1 with a stable outlook, stems from the economic strength and financial stability which characterize the Israeli economy and from the country’s strong external position. In addition, the rating ratification stems from the persistent decline in the public debt to GDP ratio which is in complete contrast to the trend in many other developed countries. However, the improvement has slowed considerably since the beginning of the global financial crisis and Moody’s noted that they had witnessed repetitive amendments of government deficit targets in an upward direction. The agency favourably noted the deep and liquid funding sources of the government, both in the domestic and the global markets.
According to Moody’s, the key challenges facing the Israeli economy are the geo-political risks, especially the Iranian threat and demographic trends which, in the medium to long term, indicate a growth in the population groups that are characterized by low participation in the labour force. In this context, Moody’s analysts favourably noted the renewal of negotiations with the Palestinians, IDF conscription reforms and welfare grants encouraging vulnerable populations to join the workforce. In addition, the rating agency noted the high-tech sector and the production of natural gas that began in 2013 as strong and sustainable growth engines in the Israeli economy.
The report placed special emphasis on retaining fiscal discipline and the importance of adhering to the deficit goals the government had set for itself as well as the ongoing commitment to continue to reduce the debt – GDP ratio.
In its announcement, Moody’s notes that a major improvement in the geopolitical situation and an ongoing significant reduction in the public debt to GDP ratio may lead to a rating upgrade, whereas deterioration in the geopolitical situation and the cessation of the trend of lowering the debt to GDP ratio could negatively affect the country’s rating.
The Accountant General, Mrs. Michal Abadi-Boiangiu, said: “As noted in the report, the downward trend in recent years of the debt-GDP ratio and the responsible and professional debt management policy implemented by Debt Management Unit at the Accountant General’s Finance Division, are necessary in order to maintain the State of Israel’s high credit rating”.