A leading international rating agency has raised its rating outlook for the economy of Israel from “stable” to “positive”, despite the volatile security situation in the region. The rating for now remains unchanged, however, with an upgrade in outlook Israel’s rating could be upgraded in the next 12-18 months for the first time since 2008.
Globes reported on Sunday that Moody’s Investors Service upgraded Israel’s status, following a similar assessment from Standard & Poor’s (S&P) last year. Israel’s current rating is A1. If the prognosis results in an upgrade, the rating will rise to Aa-.
Israel’s Minister of Finance Moshe Kahlon hailed the news as “further evidence of the strength and stability of the Israeli economy. All the data indicate that the economic policy that we are pursuing, including a free and responsible economy alongside strengthening the middle class and poorer sections of society, is the right way.”
Moody’s named two reasons for the upgrade: fiscal discipline and strong economic growth.
The agency observed that the Israeli government debt ratio has declined by more than 10 percentage points to 60% of GDP, reflecting both “prudent budgetary framework” and “robust growth performance,” driving tax revenues.
“Israel is one of only a handful of advanced economies (including Norway, Switzerland and Singapore, which are all rated Aaa with a stable outlook) with a lower debt to GDP ratio today than before the global financial crisis,” the agency said. Moody’s added that Israel’s annual budget deficits have remained below 3% of GDP over the past four years.
Another driver for the decision to upgrade the Jewish State, the agency said was “Continued healthy growth and current account surpluses in the face of persistent geopolitical tensions (…) Furthermore, continued progress developing the Leviathan gas fields, which provides increased clarity on the potential size and timing of the economic and fiscal benefits, would also support an upward move in the credit rating.”
Moody’s also highlighted the “positive outlook is Israel’s increasingly resilient economy, supported by the dynamism of the high-tech sector, increased energy independence and a strengthening external position, which, if sustained, will continue to support more favourable growth rates than similarly rated peers.”
Israel ranked third place on the World Economic Forum’s Global Competitiveness Index for 2017-2018 in innovation, behind the United States and Switzerland.
[Photo: Government Press Office – לשכת העיתונות הממשלתית / YouTube ]