International credit rating agency Moody's has issued a very positive assessment of the Israeli economy, reaffirming the country's A1 sovereign debt rating with a positive outlook.
The report calls attention to the improvement in Israel's debt to GDP ratio in the past decade, pointing out that " it is one of only a handful of advanced countries that has a lower debt-to-GDP ratio now than before the global financial crisis." "Israel's economic growth has outpaced most other advanced industrial countries over the past decade, driven by a strongly competitive high-tech export sector and a diversified economic base that now includes energy exports," said Evan Wohlmann, a Moody's Vice President - Senior Credit Officer and the report's author. "The development of the Leviathan gasfield is likely to further strengthen Israel's net creditor position."
The main risks to Israel's credit standing, according to Moody's, are political. One is the escalation of low-scale conflicts in the region and with the Palestinians. The other is internal political uncertainty after two elections have failed to produce a new government. "The current extended election season has prolonged political uncertainty and reform inertia, while also delaying more comprehensive efforts to address the widening budget deficit.
"An intensification of fiscal consolidation efforts following the formation of the next government that helps to broadly preserve the debt-reduction gains seen over the past decade would be credit positive. Continued development of the Leviathan gasfield and increased clarity on the potential size and timing of the economic and fiscal benefits would be credit positive," the report states, while conversely, "the outlook could be stabilized if geopolitical developments materially disrupted Israel's economic stability, or if the government's demonstrated commitment to fiscal discipline including a low debt burden were to wane."
Published by Globes, Israel business news - en.globes.co.il - on November 24, 2019
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