International credit rating agency S&P affirmed Israel's sovereign foreign currency rating on Friday at AA-, and retained its Stable rating outlook.
S&P stresses the core strengths of Israel's rating, such as a wealthy and robust economy, strong external accounts, and the advantages of a flexible monetary policy and a deep pool of local savings. The main limitations on the rating remain relatively high debt and geo-political risks.
S&P sees the Israeli economy shrinking as a result of the coronavirus pandemic by 5.0% in 2020, but sees recovery in 2021, with 4.5% growth.
S&P's analysts point out that Israel's fiscal deficit will grow to over 12% of GDP this year, and government debt will rise to 73% of GDP. Nevertheless, they stress that unlike many other countries in the region, Israel benefits from very flexible monetary policy, which enables the Bank of Israel to support the government's financing needs while keeping the cost of raising debt under control. They see the government starting to rein in the fiscal deficit from the second half of 2021, and estimate that it will decline to 4% of GDP in 2022-2023, while public debt will stabilize at around 77% of GDP.
S&P mentions the "Abraham Agreements" signed by Israel recently with the UAE and Bahrain as conducive to economic, commercial and security cooperation between the three countries.
Minister of Finance Israel Katz said, "The decision by S&P to keep Israel's sovereign rating at AA- with a stable outlook is a great vote of confidence in the Israeli economy. The State of Israel is well placed in relation to many countries struggling with the coronavirus crisis, thanks to the correct policy we have adopted of giving broad aid to the various sectors while preserving fiscal frameworks and creating growth engines for the future.
"I thank outgoing Accountant General Rony Hizkiyahu, who led the work of the Ministry of Finance vis-a-vis the rating agencies, and the professionals at the Ministry of Finance for their contribution to this important achievement. Together with the professional staff at the Ministry of Finance we shall continue to formulate the 2021 state budget, while promoting a series of reforms that will benefit the economy and every citizen of Israel."
Israel's current ratings by the international rating agencies are: S&P, AA-, stable; Fitch, A+, stable; and Moody's, A1, stable.
Published by Globes, Israel business news - en.globes.co.il - on November 15, 2020
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