International credit rating agency S&P has left Israel's sovereign rating unchanged at AA- with a stable outlook, despite the political instability in Israel and the country's oversize fiscal deficit.
S&P is not overly concerned by the large fiscal deficit expected to accumulate in Israel by the end of the year and by the fact that the ratio of debt to GDP is rising for the second consecutive year, explaining that there is consensus among Israeli politicians on the need to maintain a responsible fiscal policy. Nor does the strengthening shekel arouse special concern - S&P does not see it hurting Israeli exports.
In general, S&P prefers to focus on the positive side of the Israel story, stressing the fact that the Israeli economy has grown for 15 consecutive years, unemployment is at a low of 3.6%, and the country's technology industry is enjoying peak investment. S&P does mention the paralysis caused by two general elections within six months of each other, saying that this prevents the government from dealing with the economy's fundamental problems: lagging investment in infrastructure, excessive bureaucracy, and the challenge of integrating haredim and Arabs into the workforce. The agency also mentions security risks arising from Iran, Syria, and the Gaza Strip, but the bottom line is clear: the Israeli economy is strong, and the country's large balance of payments surplus puts it in fifteenth place in the world for the ratio between global assets and liabilities.
In February this year, S&P estimated that the Israel economy would grow by 3% annually on average until 2022, with growth being driven by private consumption, corporate investment, and strong performance in exports of services supported by monetary flexibility.
Published by Globes, Israel business news - en.globes.co.il - on August 4, 2019
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