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S&P boosts Israel’s credit rating to highest ever

The S&P credit rating agency raised Israel’s grade from A+ to AA-, the highest level ever for the Jewish state. 

By Batya Jerenberg, World Israel News

Israel’s sovereign credit rating shot to its highest in history Friday when the internationally recognized credit agency Standard and Poor (S&P) categorized the Jewish state as AA- instead of A+. This follows Moody’s Investors Service’s upgrade in outlook for the country from “stable” to “positive” two weeks ago.

In an interview on Army Radio Sunday, Minister of Finance Moshe Kahlon said the new credit rating would save the country “billions of shekels” that could then go towards education, health and welfare. He also promised that the minus sign after the AA “will disappear in a year.”

In a statement Saturday night, Prime Minister Benjamin Netanyahu noted that this raise “positions Israel among the strongest economies in the world” and “attests to the responsible economic policy that we in the government have been conducting.”

The upgrade means that these agencies believe that the government has a high ability to meet its debt obligations on time and in full. What is particularly meaningful in Israel’s case is that these companies evaluate both the economic and political environment of a country when determining its sovereign credit rating – so no matter what charges are being thrown at the country both from within and without, Israel is considered a stable democracy by these objective viewers.

Excellent credit ratings snot only give investors – such as pension funds and other huge companies — confidence that the government bonds they buy in bulk will be repaid. They also encourage direct foreign investment in private companies, which Israel has excelled in attracting in ever-greater numbers over recent years.

According to Globes, the positive outlook of Moody’s, another credit-rating agency, which was made last month, will mean a rise in credit rating as well in a year or so, if economic indicators keep up the pace.

“Continued healthy growth and current account surpluses in the face of persistent geopolitical tensions would be credit positive in this respect,” Globes reported the agency as saying. “Furthermore, continued progress developing the Leviathan gas fields … would also support an upward move in the credit rating.”

Moody’s was especially upbeat due to the general government debt ratio having declined over the last 10 years to around 60% of Israel’s Gross Domestic Product (GDP) – the total value of everything produced by all the people and companies in the country.

S&P decided on marking the upgrade now for several reasons, including the fact that although this debt load of  60% is “relatively high,” the agency believes that “significant reversal of the debt path are unlikely.”

“Israel has demonstrated sound economic performance since the global financial crisis, with a current GDP of about $140 billion (or 50%) larger than in 2010; the current account in a sustainable surplus and unemployment is at historic lows,” its statement explained.

“Absent global trade shocks,” it added, “Israel’s economic growth outlook will remain solid and allow the government to accommodate pressures coming from social and infrastructure spending, as well as a potential moderate escalation of security risks.”

It also noted the fact that Israel is a net lender to the world, not a borrower.