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

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 in-depth 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.