Moody's has reiterated its A1 government debt rating for Israel
Moody's Investment Services has reiterated its A1 government debt rating with a "Stable" outlook for Israel.It says that the rating balances the country's high levels of economic, institutional, and financial strength, as well as its geopolitical challenges.
The Ministry of Finance hopes that 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.
Moody's VP sovereign risk group Anthony Thomas said, "The Israeli economy is resilient and dynamic, and the macroeconomic policy framework is coherent." He cautions, however, "We are less concerned about Israel's fiscal well-being than we are about the potentially negative consequences for investment and territorial security," citing Israel's geopolitical challenges and its good track record in coping with them.
Moody's notes that Israel's government debt figures were relatively unaffected by the global crisis, and are already improving. The debt-to-GDP ratio fell slightly below its pre-crisis level by the end of 2010.
Moody's adds that Israel's high-tech exports based economic model is performing well and underpins favorable medium-term growth prospects. The new Bank of Israel Law (5770-2010) and additional limits on fiscal spending and deficits strengthen already robust institutions.
However, Moody's warns that the unrest across the Middle East highlights the regions geopolitical risks. While the unrest is motivated by internal political discontent, it could potentially have fiscal repercussions for Israel if defense spending has to be increased.