Is­rael’s credit-rat­ing up­graded — al­beit with a slight warn­ing

The Jewish Chronicle - - WORLD NEWS - BY ANSHEL PFEFFER

THE NEWS this week­end that Stan­dard & Poor’s, one of the lead­ing in­ter­na­tional credit-rat­ing agen­cies, has up­graded Is­rael’s rat­ing to AA-mi­nus from A-plus, should not come us a sur­prise. Nearly all of Is­rael’s ma­jor eco­nomic in­dices — GDP, for­eign in­vest­ment and em­ploy­ment — have been uni­formly healthy for over a decade now. Is­rael was not only one of the few economies to weather the global fi­nan­cial cri­sis at the end of 2008 well, it has been uniquely po­si­tioned to take ad­van­tage of the ex­pand­ing global tech-fu­elled knowl­edge and in­for­ma­tion in­dus­tries.

A dou­ble-A rat­ing, for the first time in Is­rael’s his­tory, will al­low the gov­ern­ment to re­struc­ture its loans and save hun­dreds of mil­lions, per­haps bil­lions, in the com­ing years. The up­grade has been in the air for a while, es­pe­cially as the last time S&P up­graded Is­rael’s rat­ing was seven years ago. It is ex­pected that the other ma­jor credit-rat­ing agency, Moody’s, will do so soon as well. Both agen­cies had teams of an­a­lysts vis­it­ing Is­rael in re­cent months, work­ing on their in­depth as­sess­ments.

The Min­istry of Fi­nance and the Bank of Is­rael in­vested a lot of time and ef­fort in host­ing the del­e­ga­tions of an­a­lysts, sched­ul­ing meet­ings for them with both econ­o­mists in the pub­lic sec­tor as well as busi­ness and in­de­pen­dent an­a­lysts and jour­nal­ists.

One of the main is­sues the credit- rat­ing an­a­lysts were in­ter­ested in was the prospects for po­lit­i­cal sta­bil­ity, whether Ben­jamin Ne­tanyahu re­mains in power and if he is re­placed and his pro­longed pe­riod in of­fice ends, what comes next. With the eco­nomic data strong, po­lit­i­cal out­look be­comes that more im­por­tant. It seems the an­swers to their ques­tions al­lowed them to reach the con­clu­sion that what­ever the fu­ture holds for Mr Ne­tanyahu, Is­rael can ex­pect to re­main sta­ble.

“Ab­sent global trade shocks, 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,” was S&P’s bot­tom line. The sign-off was a mild warn­ing how­ever. Is­rael’s econ­omy can take a “mod­er­ate es­ca­la­tion of se­cu­rity risks” — it has in­deed been largely iso­lated from the fight­ing in Gaza and chaos in neigh­bour­ing coun­tries Egypt and Syria, over the last decade. But a more se­ri­ous es­ca­la­tion is al­ways a pos­si­bil­ity in the Mid­dle East.

The up­grade is en­cour­ag­ing but the fact it has taken Is­rael so long to reach this level, and the cov­eted tripleA still be­ing seem­ingly out of reach, are re­minders that, ul­ti­mately, Is­rael’s econ­omy will al­ways re­main hostage to some de­gree to its re­gional lo­ca­tion and geopo­lit­i­cal sta­tus.

The old joke, that the only way to make a small for­tune in Is­rael is to come with a large for­tune has long been ob­so­lete. But t as long as the Mid­dle East is in tur­moil and most neigh­bour­ing mar­kets are closed to Is­raeli busi­nesses, the coun­try’s full eco­nomic po­ten­tial will re­main un­ful­filled.

PHO­TOS: GETTY IM­AGES(2)

The Is­raeli econ­omy has been per­form­ing well for many years

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