Despite “ongoing political and security risks” and a higher-than-preferred government debt level, international credit rating firm Fitch maintained Israel’s credit rating at A-plus. The high rating will ensure that Israel continues to enjoy credit on favorable terms on international markets.
“Israel’s macroeconomic performance has been strong and the economy will remain buoyant in 2019, with real GDP growth of 3.1%, low unemployment, rising wage growth and still low inflation,” Fitch said in its evaluation. That growth has been sustained over the past five years and is expected to continue, with growth levels of around 3% over the next few years. Israel is also very prompt in returning debts – and exports, especially services, have been strong.”Israel’s ratings are constrained by political and security risks, but its credit profile has shown resilience to periodic conflict and political shocks over an extended time frame,” Fitch said.
In its own prediction of the results of the upcoming election, it is “unlikely to present a clearer outcome than the previous one in April, and building a coalition is likely to prove challenging.” Other risks involve a flare-up of tensions with Syria and/or Iran.
Also problematic is the country’s budget deficit, which is significantly higher than what Fitch considers healthy. With that, Israel has been making important strides in reducing debt; external debt, which was 20% of GDP in 2006, is today only 8% of GDP. “Israel benefits from high financing flexibility, having deep and liquid local markets, good access to international capital markets, an active diaspora bond program, and U.S. government guarantees in the event of market disruption,” as well.
With that, doing business in Israel is more difficult than it is in other OECD countries, Fitch said. “The government also faces socio-economic challenges in terms of income inequality and integration of growing but less economically productive sections of the population into the labor force,” the agency’s evaluation added.