S&P confirms Israel’s AA- rating, citing resilient economy despite security risks

Rating agency Standard & Poor’s (S&P) kept Israel’s favorable rating unchanged at AA- with a “stable” outlook, the Finance Ministry said late Saturday, citing the company’s announcement released Thursday.

The announcement was not readily available on S&P. Still, the agency cited Israel’s strong economic performance over the past year, a robust economy and an “optimal debt structure”, according to the Finance Ministry.

S&P also expressed concerns about political and security risks in the country, given the coalition’s loss of its already slim majority and future political landscape, as well as a continuing wave of terrorist attacks that cost the lives of 19 people in Israel. and the West Bank since the end of March.

S&P said it expects Israel’s economy to grow at a rate of 5.5% in 2022, following growth of more than 8% in 2021, which beat forecasts and marked the highest rate of financial growth. high recorded in Israel in 21 years, according to data released in February. by the Central Bureau of Statistics.

The OECD had projected growth of around 6.3% in 2022 for Israel in its December 2021 Economic Outlook.

S&P noted Israel’s positive fiscal performance and a strong technology sector, which constitute a resilient economy, as well as the “limited impact” of Russia’s war against Ukraine on Israel.

The headquarters of American financial corporation Standard and Poor’s (S&P) in lower Manhattan, New York. May 2014. (mixmotive via iStock by Getty Images)

“The stable outlook balances high domestic geopolitical and political risks and the pandemic-induced deterioration in Israel’s fiscal position, against the state’s still resilient economy, improving fiscal performance and balance sheet strength. payments,” the S&P announcement said, according to Chinese state media Xinhua. .

S&P expects an average inflation rate of 3.8% in 2022, noting that this rate is significantly lower than that of most developed countries. Inflation in the United States, for example, peaked at 8.5% in March, falling to 8.1% in April.

Israel’s annual inflation rate hit 3.5% in February, the highest since 2011, and above the central bank’s target of between 1% and 3%. The Bank of Israel last month raised the benchmark interest rate to 0.35% from 0.1% since the start of the pandemic, a move intended to limit rising inflation and oil prices. real estate in Israel.

The central bank is expected to raise the interest rate further. It had revised its inflation forecast to reach 3.6% in 2022, while falling to 2% in 2023.

The consumer price index, which measures the price of an average basket of consumer goods, rose 0.6% in March from the previous month, according to the Central Bureau of Statistics. The year-to-date increase was 1.5%, the data showed.

An aerial photo of the Tel Aviv Stock Exchange and surrounding area, April 20, 2022. (Matanya Tausig/Flash90)

Housing prices have marked a more dramatic increase – around 15% since last year.

Finance Minister Avigdor Liberman welcomed S&P’s rating and said the government is currently working on the 2023 state budget, “which will ensure continued growth for the citizens of the State of Israel.”

The rating came a month after another leading agency, Moody’s, raised Israel’s economic outlook from stable to positive and affirmed its credit rating at A1.

Moody’s cited Israel’s strong economic growth and the government’s “reform agenda” on challenges such as labor productivity and the participation of underrepresented communities in the workforce. Israel last earned a “positive” outlook from Moody’s in July 2018, which was later downgraded to “stable” in April 2020 when the COVID-19 pandemic began to gather pace in the country.

In February, Fitch Ratings reaffirmed Israel’s A+ rating with a stable outlook, also noting the country’s strong economic performance and a reduction in the budget deficit in 2021.

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