Fitch ratifies Israel's A credit rating, praises deficit drop - Zeev Klein

by Zeev Klein

Economists predict that Israeli economy will return to 3.4% growth in 2015, cite security-diplomatic situation and high debt-GPO ratio as the main factors that prevented Israel from earning an A+ credit rating • Israel's deficit shrank to 2.8% in 2014.

The Bank of Israel: The timing of Fitch report was no coincidence, Finance Ministry officials believe | Photo credit: Contact

The international credit rating agency Fitch on Friday ratified Israel's A credit score and gave the country a stable outlook. 

Economists at Fitch predict that economic growth in Israel in 2015 will return to a level of 3.4%, given the weak shekel, expansionary monetary policy, higher investment, a stronger global economy and a rebound from the Gaza conflict. Meanwhile, the inflation rate remains low, slightly above 1%. 

According to the economists, the country's security-diplomatic situation and the high government debt to GDP ratio (67.1%, compared to the peer median of 47%) comprise the main weak points of Israel's economy that prevent it from earning a higher credit rating of A+. 

Senior officials in the Finance Ministry believe that the publication of Fitch's credit rating for Israel five days before the fourth government led by Prime Minister Benjamin Netanyahu is sworn is was no coincidence and was intended to deter the Treasury from raising the budget deficit to a record NIS 57 billion ($14.76 billion), as incoming Finance Minister Moshe Kahlon (Kulanu) has declared he would do. 

The issue ratings on Israel's senior unsecured foreign and local currency bonds have also been affirmed at A and A+, respectively. 

Fitch also noted that natural gas production should ensure sustained current account surpluses, which the agency forecast to average just over 3% of GDP over 2015-2016.

Economists at Fitch, however, praised the fact that Israel's deficit shrank to a mere 2.8% of GDP during 2014, the lowest deficit since 2008.

Zeev Klein

Source: http://www.israelhayom.com/site/newsletter_article.php?id=25351

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