Fitch Updates Israel’s A+ Rating

Israeli Prime Minister Naftali Bennett, Foreign Affairs Minister Yair Lapid, Minister of Defense Benny Gantz seen during the Knesset budget debate earlier this month. (Olivier Fitoussi/Flash90)

Fitch Ratings has reaffirmed Israel’s A+ rating with a stable outlook, citing passage of a state budget for 2021-22 as a positive sign.

Calling the new budget “an important milestone,” the prestigious international ratings agency went on to say in an update on Thursday:

“The Israeli Knesset’s passage of budgets for 2021 and 2022 reduces political uncertainty and potential risks to the public finances, affirming the government’s capacity to advance legislation. The budget approval is in line with our expectations when we affirmed the sovereign rating at ‘A+’ with a Stable Outlook in July 2021.”

The NIS 609 billion ($194 billion) spending plan for 2021 and the NIS 562.9 for 2022 marked the first budget passed in over three years due to political deadlock.

The new budget, noted Fitch, puts the deficit target at 6.8 percent of GDP in 2021 and 3.9% in 2022, down from a peak of 11.4% in 2020 due to the COVID-19 pandemic.

Fitch cautioned, however, that though some risks to the economy have receded, it still views the budgetary framwork for 2022 as “vulnerable to fiscal slippage, particularly if the economy were to experience another shock, for example due to global supply-chain disruptions or higher energy prices.”

Fitch, which is based in New York and London, is considered one of the three major credit rating agencies, along with Moody’s and Standard & Poor’s.