International rating agency Standard & Poor's (S&P) has upgraded its outlook for Israel's credit rating from "Stable" to "Positive". The upgrade is in the light of the Israeli economy's resilience in the face of external shocks. S&P confirmed its long-term foreign currency and local currency ratings for the State of Israel at A- and A+. The short-term rating for both foreign currency and local currency is A-1.
S&P analyst Veronique Paillat-Chayrigues said that the outlook upgrade reflected the improved capability of the Israeli economy to withstand geopolitical shocks, and that "the horizon for a rating improvement hinges on the pace of fiscal consolidation and on the future security situation."
"The outlook revision reflects the improved resilience of Israel's public finances and economy to geopolitical shocks, after a three-year period of fiscal consolidation and strong economic growth. It also incorporates our expectation that fiscal consolidation will remain a key political priority in the medium term, enabling a further decline in the general government deficit and debt ratios. Moreover, we assume that the geopolitical context will remain difficult, but that a potential deterioration can be absorbed," S&P's report says, and continues, "The ratings on Israel are supported by a prosperous and growing economy, robust external indicators, and a strong political commitment to structural reform and long-term fiscal consolidation. The ratings remain constrained by Israel's comparatively heavy public debt burden, as well as by the economy's vulnerability to the risky regional geopolitical environment."
Minister of Finance Abraham Hirchson expressed satisfaction at the outlook upgrade, which follows similar upgrades by Moody's, in May 2006, and by Fitch, in December 2006. He said the upgrade was a commendation for the government's economic policy and for the economy as a whole.
Published by Globes [online], Israel business news - www.globes.co.il - on February 13, 2007
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