Prime Minister Benjamin Netanyahu recently spoke with top executives at S&P in an attempt to prevent the international credit ratings agency from lowering Israel's credit rating outlook or its credit rating, which is currently AA-. This Friday, S&P will publish its updated credit rating for Israel.
The current rating is considered high
S&P's current credit rating for Israel is considered high in general and in particular compared with Moody's rating. On the other hand, S&P's outlook for Israel is stable and unlike with Moody's, cutting the forecast would lower Israel to negative, in other words an expectation for a future cut in the actual credit rating itself. This would influence the Israeli government's ability to raise capital to finance its debts.
Last month Moody's cut Israel's credit outlook from positive to stable, citing Israel's planned judicial overhaul and the political situation in the country as reasons for its decision, although it kept the credit rating itself unchanged, while in March Fitch changed neither the outlook or credit rating but did warn on the planned judicial overhaul.
Sources close to Netanyahu, said that in his talks with S&P he stressed Israel's growth engines and relative advantages.
S&P's imminent decisions has generated major interest in the market with investors wondering whether S&P will follow in Moody's footsteps and cut Israel's rating outlook or not. The Ministry of Finance has even held discussions on the likelihood of what is on the agenda.
S&P's Israel rating has remained unchanged for the past five years with Israel's rated alongside some of the world's strongest economies like Ireland, the Czech Republic and Slovenia. This has enabled Israel to raise debt at relatively low interest rates and the country is considered a low risk environment for investors.
On the most recent occasion that S&P published Israel's credit rating in November 2022, the agency stated positively that "Israel's fiscal policy has strengthened and there is an expectation of a balanced budget for 2023." On the negative side, the rating agency noted geopolitical factors: "Despite the Abraham Accords and the signing of the maritime border agreement with Lebanon, an escalation of hostilities with organizations surrounding Israel is certainly a real possibility."
Published by Globes, Israel business news - en.globes.co.il - on May 8, 2023.
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