Fitch Ratings has raised Israel’s long-term foreign- and local-currency issuer default ratings to A+, bringing them into line with those of Standard & Poor’s and Moody’s.
“Israel’s external balance sheet has continued to strengthen. The country has returned annual current account surpluses each year since 2003, and in 2015 posted a record surplus of 4.6% of gross domestic product,” Fitch noted, adding that it “expects current account surpluses to persist in 2017 and 2018.”
“Further gas sector development will lend additional support to the external balance sheet. Production at the Tamar gas field off the coast of Israel, which commenced in 2013, has reduced the need for gas imports. The government approved an amended natural gas framework in July 2016, thus providing the regulatory green light for the development of the larger nearby Leviathan gas field,” Fitch said. It also noted a sustained drop in Israel’s debt-to-GDP ratio, to 63.9% at end-2015, from 74.6% at end-2007 and 95.2% at end -2003.
“The debt structure is also favorable; for example, foreign-currency debt fell to 8.7% of GDP in 2015, from 14% in 2008. Israel benefits from high financing flexibility. It has 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,” Fitch’s statement on Friday said.
Regarding Israel’s geopolitical situation, Fitch said: “Israel’s ratings will continue to be 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 believes prospects for a realistic peace process remain bleak.”
“Israel’s well-developed institutions and education system have led to a diverse and advanced economy. Human development and GDP per capita are above the peer medians, and the business environment promotes innovation, particularly among the high-tech sector. However, Doing Business indicators, as measured by the World Bank, have slipped below peers. The government also faces socioeconomic challenges in terms of income inequality and social integration,” Fitch said.
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