Monday, September 12, 2011
S&P Upgrades Israel’s Credit Rating to A+
The now infamous Standard and Poor’s (S&P) has raised Israel’s credit rating from “A” to “A+”. S&P mentioned that their ratings on Israel are supported by their view of its “prosperous and resilient economy, strong institutions, ongoing fiscal consolidation, and robust external performance.” The ratings are also constrained by significant geopolitical risks, partially offset by U.S. support, and its still-sizable public-sector debt burden.
Bank of Israel governor Stanley Fischer welcomed the move saying that “the Israeli economy’s good state is a result of the government’s budget policy, the Bank of Israel’s monetary policy and the business sector’s success.”
According to S&P, Israel is on a credible path toward continued government debt burden reduction and stronger external indicators, having weathered the global financial crisis well. S&P also noted that Israel’s external position is sound, as a result of consistent current account surpluses since 2003, and that that the production of natural gas by the middle of the decade is likely to further increase the economy’s efficiency as well as strengthen its fiscal and external positions.
Also, according to the agency, Israel’s banking sector appears to be tightly regulated, resident banks seem to pursue relatively conservative business models, and Israeli banks and households are also fairly well capitalized by international standards.
S&P first upgraded Israel’s credit rating to ‘A’ in 2007. In January 2009, it reaffirmed its decision, further giving Israel’s market a “solid” forecast. Alongside the decision by S&P to upgrade Israel’s credit rating to A+ this September, the two other major credit rating firms, Moody’s and Fitch, also reaffirmed their rating towards Israel, as Moody’s left Israel’s A1-Stable rating unchanged, and Fitch ratings left Israel’s A Stable rating unchanged.
The Accountant General in the Ministry of Finance, Ms. Michal Abadi-Boiangiu, noted that “the announcement by S&P in such times, when the world is confronting a deep global economic crisis, testifies on the strength of the Israeli economy and reinforces the importance of reducing Israel’s public debt.”
See the graph below to see how much has changed over the last decade: