Standard & Poor’s Gives Israel A+

Standard & Poor’s Ratings Services (S&P) has given Israel an A+ foreign currency credit rating, Globes reported.

While noting the obvious geopolitical risks, along with struggling government finances, S&P awarded a “stable” outlook to the Israeli economy as a whole, also reaffirming its local currency A-1 sovereign credit rating.

“Fiscal consolidation is taking hold in Israel, following the passage of the 2013-2014 budget, and as a result, we expect a modest decline in the general government debt burden,” said S&P on Friday.

The stable outlook is based in part on anticipated natural gas production, as well as a generally prosperous and diverse economy.

S&P forecasts real GDP per capita growth of 1.2 percent for 2013, comparable to the growth rate in 2012. However, putting the contribution of natural gas aside, the implication is that overall economic activity is weakening. The rating agency forecasts that per capita growth will gradually increase again to an average of 1.7 percent in 2014-16, in line with a modest recovery in Israel’s key export markets.

S&P expects general government debt to rise by 4.4 percent of GDP in 2013, and the average increase in 2013-16 to be 3.3 percent of GDP.

“Nevertheless, we expect Israel’s net government debt burden to modestly decline over the forecast horizon, to below 65 percent of GDP by 2016, from 68 percent currently,” it said. “This is due to the increase in nominal general government debt over the period being slightly lower than the increase in nominal GDP.”

Regarding the leadership vacuum at the Bank of Israel, S&P appeared sanguine. Although “half the positions on the Monetary Policy Board, including the governor, have no designated successors since resignations were announced in July 2013, the bank has sufficient institutional depth to manage the situation.”

This article appeared in print on page 7 of the September 30th, 2013 edition of Hamodia.