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August 16, 2013 9:09 am

Moody’s Ratifies Israel’s A1 Credit Rating

avatar by Joshua Levitt

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Finance Minister Yair Lapid, leader of the Yesh Atid party. Photo: Yesh Atid.

Finance Minister Yair Lapid, leader of the Yesh Atid party. Photo: Yesh Atid.

International credit rating agency Moody’s Investors Service on Thursday confirmed Israel’s A1 credit rating with a stable outlook.

The rating was ratified following an annual visit to Israel by Moody’s analysts last month, during which they met with senior finance officials in the public and business sectors. The affirmation is the country’s first since Moody’s raised Israel’s rating to A1 in April, 2008.

“This additional approval by the credit rating company speaks to the sustainability of the economy from shocks, and the dynamism that allows Israel to continue to grow, in the face of a decline in global demand and in light of the external security threats,” Finance Minister Yair Lapid told reporters according to Israel’s Channel 2.

In its statement, Moody’s said that Israel’s A1 credit rating was based on the economic and financial strength of the economy and the strong external accounts of the state. In addition, the ratification of the rating was due to the continuing decline in public debt relative to GDP, in contrast to the trend in many other developed countries.

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The Moody’s ranking system includes the following options: AAA, AA, A, BAA, BA, B, CAA, CA, C. A 1, 2 or 3 can also be added to designate additional tiers. Last month, Moody’s also ratified its AAA rating for the U.S., predicting a stable outlook based on deficit trimming. Other countries with an A1 rating include South Korea and the Czech Republic.

Moody’s said Israel’s deep access to sources of government funding in both domestic and global markets was very positive.

The most important sectors for continued national growth are expected to be high technology, and natural gas production, which began this year.

Key challenges facing the economy, according to Moody’s, were geopolitical, especially the Iranian threat, and demographic trends, which in the medium and long-term show an increase of population groups characterized by low participation in the labor force.

In this context, Moody’s noted favorably the recent renewal of peace talks between Israel and the Palestinian Authority, IDF recruitment related reforms and welfare grants that support members of vulnerable populations wishing to join the workforce.

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