Credit ratings agency Fitch on Monday kept Israel’s credit rating at A+ with a stable outlook.
The U.S.-based agency said in a report cited by Israel’s Finance Ministry that the result weighs up “a diversified, resilient, and high value-added economy and strong external finances against a relatively high government debt-GDP ratio, ongoing security risks, and a record of unstable governments that hindered policymaking.”
Fitch’s best- and worst-case scenario credit ratings range from AAA to D, and A+ is three notches below the top grade.
Regarding the government’s controversial judicial overhaul, the report assessed that it might adversely affect Israel’s credit metrics, yet probably won’t cause a significant departure of skilled professionals and investment from the hi-tech industry.
It also warned that a weakening of Israel’s central bank independence, as proposed by some parliament members and government officials, would reduce the credibility of Israel’s policymaking.
The report projected 3.1 percent and 3 percent GDP growths for 2023 and 2024, respectively, in Israel, primarily due to its judicial changes and tight monetary policy, as well as slow global growth.
It also forecasted Israel’s inflation to continue slowing until the end of this year as import prices drop and consumption and investment moderate.
Additionally, it foresaw a continued increase in the country’s budget deficit to reach 4 percent of the GDP by 2025, driven by expenditure demand and the government’s reluctance to implement tax hikes.
The report also noted that Israel’s ratings are constrained by security risks, including the continuous conflict with Iran and Arab countries, particularly Palestine.
Israeli Prime Minister Benjamin Netanyahu and Finance Minister Bezalel Smotrich said in a joint statement that “the affirmation of Israel’s credit rating once again proved that the Israeli economy is strong, stable, solid, and good for business and investment.”