Moody’s leaves Israel’s rating unchanged

Steinitz says A1 rating confirms Israel economic policy success.

By YAEL GRUNTMAN / GLOBES
Money Shekels bills 521 (photo credit: Courtesy)
Money Shekels bills 521
(photo credit: Courtesy)
Moody’s Investment Services has reiterated its A1 government-debt rating with a “stable” outlook for Israel in its annual credit report. The rating balances the country’s high levels of economic, institutional and financial strength, as well as its geopolitical challenges, the report said.
The Finance Ministry hopes Moody’s will upgrade Israel’s debt rating by the end of the year or in early 2012. For now, Moody’s is making no change in its debt rating, nor hinting at any change in the foreseeable future.
“The Israeli economy is resilient and dynamic, and the macroeconomic policy framework is coherent,” Moody’s vice president Anthony Thomas said in the report. “We are less concerned about Israel’s fiscal well-being than we are about the potentially negative consequences for investment and territorial security,” he said, citing Israel’s geopolitical challenges and its good track record in coping with them.
Moody’s said the government debt figures had been relatively unaffected by the global crisis and are already improving. The debt-to-GDP ratio fell slightly below its precrisis level by the end of 2010.
Israel’s economic model based on hitech exports was performing well and underpins favorable medium-term growth prospects, the report said. The new Bank of Israel Law and additional limits on fiscal spending and deficits strengthen already robust institutions, it said.
However, Moody’s warned that unrest across the Middle East highlights the regions geopolitical risks.
While the unrest was motivated by internal political discontent, it could potentially have fiscal repercussions for Israel if defense spending has to be increased, the report said.
The A1 debt rating was “further confirmation of the success of the government’s economic policy,” Finance Minister Yuval Steinitz said Tuesday in a press statement.
Bloomberg contributed to this report.