The credit rating company Fitch reaffirms the credit rating of Israel at the level of A +

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by Ifi Reporter Category:Capital Market Aug 1, 2022

The international credit company Fitch decided to keep Israel's credit rating at A+ level and left the forecast "stable". This, despite the rising inflation in Israel and the fact that political instability once again exists.
At the same time, Fitch predicts that the state budget will not be passed before the second quarter of 2023, and therefore the State of Israel will operate in the mechanism of a continuous budget that limits the scope of the monthly expenditure allowed by the government. Also, the company sees a risk in not forming a government after the elections, which could lead to another round of elections and another delay in passing the budget.

In its announcement, the company emphasized the strong elements of the Israeli economy, including a diverse and robust economy, strong external accounts and a strong institutional structure. According to the company, the main weaknesses on the credit rating are a relatively high debt burden, security risks and political instability.
In the meantime, Fitch predicts that economic growth will be 4.6% in 2022 and 3% in 2023, against the background of the slowdown in the global economy, the effect of inflation on consumption and labor shortages in certain sectors, with the high-tech sector continuing to demonstrate strong performance. However, in the company's opinion, political instability may limit the continued growth of investment in education and infrastructure required to improve productivity.
However, the company estimates that inflation at the end of the year will be 4.1% in light of the global price increase and the increase in housing prices. The rating company notes that the labor market in Israel has returned to its pre-Corona period, which may contribute to pressure on prices in the medium term. The company continues to point out the country's strong external accounts and the moderating effect of the gas agreements on price levels in Israel.
Referring to the budget framework, the company expects a low deficit rate of 0.8% in 2022 - this is as a result of extraordinary growth in the state's revenues, and a deficit range of 2%-3% of the GDP in 2023-2024, in line with countries rated A. The rating company also expects that A significant reduction in the debt burden, as the company believes that the debt to GDP ratio will be 63.9% at the end of the year, compared to 68.8% last year. The said thanks to high nominal growth, negative real interest and low deficits. The rating company predicts that the debt to GDP will decrease to a rate of about 61% by the year 2022.
The international credit company Fitch (Fitch) decided today (Monday) to keep Israel's credit rating at A+ level and left the forecast "stable". This, despite the rising inflation in Israel and the fact that political instability once again exists.
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Credit rating company Fitch: Approval of the budget will reduce Israel's economic risks. At the same time, Fitch predicts that the state budget will not be passed before the second quarter of 2023, and therefore the State of Israel will operate in the mechanism of a continuous budget that limits the scope of the monthly expenditure allowed by the government. Also, the company sees a risk in not forming a government after the elections, which could lead to another round of elections and another delay in passing the budget.
In its announcement, the company emphasized the strong elements of the Israeli economy, including a diverse and robust economy, strong external accounts and a strong institutional structure. According to the company, the main weaknesses on the credit rating are a relatively high debt burden, security risks and political instability.
In the meantime, Fitch predicts that economic growth will be 4.6% in 2022 and 3% in 2023, against the background of the slowdown in the global economy, the effect of inflation on consumption and labor shortages in certain sectors, with the high-tech sector continuing to demonstrate strong performance. However, in the company's opinion, political instability may limit the continued growth of investment in education and infrastructure required to improve productivity.
Fitch: Inflation will amount to 4.1% in 2022
Also, the company estimates that inflation at the end of the year will be 4.1% in light of the global price increase and the increase in housing prices. The rating company notes that the labor market in Israel has returned to its pre-Corona period, which may contribute to pressure on prices in the medium term. The company continues to point out the country's strong external accounts and the moderating effect of the gas agreements on price levels in Israel.
Referring to the budget framework, the company expects a low deficit rate of 0.8% in 2022 - this is as a result of extraordinary growth in the state's revenues, and a deficit range of 2%-3% of the GDP in 2023-2024, in line with countries rated A. The rating company also expects that A significant reduction in the debt burden, as the company believes that the debt to GDP ratio will be 63.9% at the end of the year, compared to 68.8% last year. The said thanks to high nominal growth, negative real interest and low deficits. The rating company predicts that the debt to GDP will decrease to a rate of about 61% by the year 2024.
In addition, the company mentions in its announcement the security risks as a factor weighing on the credit rating. At the same time, the Israeli economy has shown resilience in the face of geopolitical events.
According to Fitch, an improvement in the credit rating is possible in the event that the trend of reducing the debt-to-GDP ratio continues over time in combination with the determination of a wise budgetary policy, and a decrease in the risks of political stability and security risks. Alternatively, if there is a continuous increase in the debt-to-GDP ratio, or if security or political risks materialize, with a serious and long-term economic impact, a negative rating action is possible.
The Minister of Finance, Avigdor Lieberman, said that "Fitch's announcement confirming the rating of the State of Israel is an expression of confidence in Israel's economy.

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