By Arye Green/TPS • 29 August, 2019
Fitch Ratings on Thursday affirmed Israel’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at A+ with a Stable Outlook for the foreseeable future.
According to the global financial rating agency, the Israeli economy balances strong external finances, robust macroeconomic performance and solid institutional strength with a government debt/GDP ratio that is high relative to peers and ongoing political and security risks.
Fitch assesses in its report that Israel’s macroeconomic performance has been strong and the economy will remain buoyant in 2019, with real GDP growth of 3.1%, low unemployment, rising wage growth and still low inflation.
Conversely, the Fitch analysts wrote in the report that Israel’s public finances remain weak relative to other ‘A’ category countries. The sustained trend of decreasing indebtedness reversed in 2018 and the fiscal outlook has become more challenging in the near term. The government budget deficit widened to 2.9% of GDP in 2018 (in line with the budget target), from 1.9% in 2017. The forecast that the deficit to widen to 3.6% of GDP in 2019.
Government debt/GDP ratio increased moderately in 2018, to 61%, ending a long downward trend from 75.0% in 2007 and 95.0% in 2003. It remains significantly higher than the ‘A’ median of 49% in 2018. The general government budget deficit and interest spending/revenue are also weaker than peer medians.
Other rating agencies have also given Israel relatively high ratings. Israel is rated ‘A1’ positive by Moody’s and ‘AA-‘ stable by S&P. The Israeli economy is currently rated highest ever in all major rating agencies.
Whether or not the deficit crisis will retract the robust ratings remains to be seen.
Israel’s Finance Minister Moshe Kahlon stated that the top-notch rating proves his policy resulted in the positive financial performance of the Israeli economy.
“The rating proves once again that the world believes in the strength of the Israeli economy. The growth-fostering policy, investment in infrastructure and fiscal responsibility that the Finance Ministry has led will keep maintain and elevate Israel’s economic standing in the world,” he said.