Fitch retains Israel's rating with stable outlook

Haifa Port  photo: Eyal Yitzhar

Following the footsteps of S&P and Moody's, international credit rating agency Fitch has affirmed Israel's credit rating at A+, and retained its Stable rating.

Following the footsteps of S&P and Moody's, international credit rating agency Fitch has affirmed Israel's credit rating at A+, and retained its Stable rating outlook. Fitch sees Israel's economic restrictions for the Covid-19 pandemic being removed, the vaccination drive continuing at its fast pace in the first half of 2021 and a limited amount of incoming tourism recommencing in the second half of 2021. Fitch predicts GDP growth in Israel of 5.4% in 2021 and 4.1% in 2022.

Regarding Israel's widening budget deficit, which reached 11.7% of GDP at the end of 2020, Fitch notes the deterioration in Israel's fiscal situation following the Covid-19 pandemic and feels that the continuing political uncertainty will complicate the chance for reducing the budget deficit. Fitch expects the budget deficit to remain as high as 9% of GDP in 2021. Debt to GDP ratio will rise from 76% in 2020 to 80% in 2023, and Fitch says that these are high ratios for a country with a credit rating like Israel but on the other hand the credit rating agency stresses that Israel's financing terms remain comfortable, among other things, due to the Bank of Israel's government bond purchasing program that has resulted in nominal returns in 10-year government bonds of lower than 1% annually.

Fitch says that Israel's strong point compared with similar countries is the current account surplus it has shown every year since 2003. In 2020 this surplus rose to nearly 4% of GDP thanks to the large contraction in import prices compared with export prices. Fitch expects Israel to continue to show a strong surplus with the growth in export services remaining robust. Fitch also cites the contribution of net foreign investments and the 38% jump in Israel's foreign exchange reserves in 2020 to $173 billion. Israel's position as a net external borrower strengthened to 58% of GDP at the end of 2020, a significantly higher figure than other median countries in the A and AA ranking groupings.

Published by Globes, Israel business news - en.globes.co.il - on January 14, 2021

© Copyright of Globes Publisher Itonut (1983) Ltd. 2021

Haifa Port  photo: Eyal Yitzhar
Haifa Port photo: Eyal Yitzhar
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