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Bank of Israel

International credit rating company Standard & Poor (S&P) has ratified the State of Israel’s crediting rating, leaving it at AA- with a stable outlook.

Representatives of the rating company emphasized Friday in their announcement the core strengths of Israel’s credit rating, such as: a diverse and prosperous economy, strong external accounts and a flexible monetary framework.


The two major limitations of the rating remained the relatively high debt burden as well as the geopolitical risks.

Company representatives noted that despite the fiscal challenges created by the second round of elections, including the transfer of the state budget for 2020 only after January, they expect fiscal discipline to be a priority for policymakers. In addition, the efficiency of the institutional and governmental system in Israel will balance the implications of the additional elections and contribute to continued responsible macroeconomic policy.

S&P estimates that the Israeli economy will grow at an average rate of just over three percent by 2022, a high rate relative to OECD countries. The company expects growth to be mainly supported by private consumption against the backdrop of a strong labor market, continued investment in companies and exports of strong services. The report noted that the economy has not faced a recession in the last 15 years and US dollar GDP has risen by 60 percent since 2010. Furthermore, the current account is in surplus and the unemployment rate is at a historic low of 3.6 percent.

The company estimates that one of the key goals the new government will pursue is fiscal discipline that includes revenue-side measures (reducing tax benefits or raising certain taxes) and reducing spending as well.

The company estimates that despite the rise in financing needs, the Israeli government has optimal access to financial markets, both in the domestic bond market and in global markets, which supports government policy to diversify financing instruments and extend the average duration of government debt (ATM) for over eight years. The company debited the state-issued IPO last month in the 50-year euro market.

Analysts positively point out the flexibility of monetary policy and the return to the inflation target that enabled interest rates to rise in November 2018 after seven years unchanged. The company also notes that one of the main challenges of monetary policy remains the real estate market and refers to the macroeconomic measures taken by the Bank of Israel in the mortgage market in this regard.

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Hana Levi Julian is a Middle East news analyst with a degree in Mass Communication and Journalism from Southern Connecticut State University. A past columnist with The Jewish Press and senior editor at Arutz 7, Ms. Julian has written for, and other media outlets, in addition to her years working in broadcast journalism.