S&P: Israel's credit rating will not change due to the war in Gaza and will stay AA minus


by Ifi Reporter Category:Financial May 15, 2021


Although we face a war with Hamas and riots within Israel, tonight (Friday) the rating company S&P approved the credit rating of the State of Israel at the AA level.
The announcement of the international credit rating company S&P came at a surprising time, when despite the military confrontation, the fact that a government has not yet been formed in Israel and there is no approved state budget - the company stated that it reaffirms Israel's credit rating on foreign currency debt ". 
In Moods, Israel is ranked at A1 and at Pitch at A +.

In its announcement, the rating agency refers to the escalation in the security situation in recent weeks, but at the same time emphasizes Israel's core strengths in the credit rating, including: rich and diverse economy, strong external accounts, flexible monetary policy and high government funding capabilities. In addition, the rating company notes positively the successful vaccination campaign and its contribution to the recovery of the economy from the corona crisis. According to the company, the main limitations on the credit rating are geopolitical risks, a relatively high debt burden and political instability.
The company notes in the affirmative the recently signed Avraham agreements between Israel, the United Arab Emirates, Bahrain, Sudan and Morocco, and estimates that they will aid economic, commercial and security cooperation between the two countries.
The company also notes that for the first time in two decades, the growth rate in 2020 was at a negative rate of 2.6%, but emphasizes that this is a rate of reasonable GDP decline relative to other countries. For the year 2021, the company expects a rapid recovery of the economy with a GDP growth of about 5%.
Regarding the budget situation, the report states that in 2020 the government deficit was about 12% of GDP and estimates that the net government debt ratio is expected to rise in the coming years from 71% to 76% of GDP. Despite this increase, the company notes that in comparison The reference countries, the State of Israel have strong external accounts, a continuous current account surplus, flexible monetary policy and access to local and global capital markets. That the government will take budgetary restraint measures starting from the second half of 2021, which will reduce the deficit levels to about 4% in the years 2022-2023.
The company explains that in case the budgetary results are better than their current forecasts or in case of a significant improvement in the security environment in the Middle East, it is possible in the future to improve the ranking. Alternatively, if there is a deeper and longer economic slowdown, which will lead to a more significant deterioration than expected in the budgetary situation, or in the event of a deterioration in the health situation that will cause a deterioration in the budget situation beyond company forecasts, then the rating may suffer.
The Accountant General, Yahli Rotenberg, said that "the approval of the ranking at its high level indicates the strength and strength of the Israeli economy, which is good at dealing with various shocks and will know how to do so in the future. The rating emphasizes, among other things, the debt management policy that has been responsible for many years. "The consumer price index rose by 0.3% in April 2021, according to a statement from the Central Bureau of Statistics (CBS) published today (Friday), compared with an expected increase of 0.5%. It also shows that housing prices continue to rise, and in February-March added 4.5% compared to the corresponding months last year.
Since the beginning of the year, the consumer price index has risen by 1.1%, and in the last 12 months (April 2021 compared to April 2020) it has risen by 0.8%.
Significant price increases were recorded in the vegetable and fruit sections - 3.0%, clothing and footwear - 2.8%, and food - 0.7%. Significant price decreases were recorded in the Communications section - 1.2%.
In parallel with the publication of the index data, the CBS also publishes the housing price index for April, from which it appears that the upward trend in housing prices continues.
A comparison of the prices of transactions made in February-March with the transactions made in January-February found that housing prices rose by 0.8%, thus completing an increase of 4.5% compared with the corresponding period last year.
In the segmentation of apartment prices by districts compared to the corresponding period last year, February-March 2021 compared to the corresponding months in 2020, price increases were found in all districts. The largest increase is in the Southern District - 6.6%, in the North - 5.7%, in the Center - 5.3%, in Tel Aviv - 3.7%, in Haifa - 3.2%, and in Jerusalem - 0.8%.
On the other hand, the prices of new dwellings decreased by 1.5% in February-March 2021 compared to the previous months January-February 2021, but completed a 1.6% increase compared to the corresponding period last year.
An interesting statistic concerns the index of residential construction inputs, to which most contracts for the purchase of new apartments are attached: it rose by 0.8% in April, and has already recorded a 2.1% increase since the beginning of the year. For those who bought an apartment "on paper" at a price of NIS 1.5 million, this is an increase of NIS 31.5 thousand within four months of the price of the apartment.
The index of construction inputs for commerce and offices jumped by 1% in April, completing an increase of 2.7% since the beginning of 2021.



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