International rating firm Pitch has left the forecast "stable"

• Pitch Company // Photo: Reuters

International credit rating firm Fitch yesterday confirmed the credit rating of Israel at A + level, with a stable outlook. According to the company, Israel's credit rating balances strong external accounts, a diversified economy with high added value and institutional resilience, and a government debt-to-GDP ratio still high relative to the reference countries and ongoing political and security risks.

Fitch analysts expect measures to address the global corona epidemic will bring a 5.6% reduction in the real GDP of the Israeli economy by 2020. However, by 2021, growth will be 5%. It is noted that the IMF expects Israel's GDP to contract at a higher rate of 6.2%.

Analysts emphasize that given the extent and duration of the outbreak of the virus, there are significant risks. On average, the unemployment rate will remain at 10% at the end of the current year.

The company statement states that Israel's fiscal situation is still a weakness in the ranked countries A. According to forecasts, the government deficit will exceed 10% of GDP in 2020, and the debt-to-GDP ratio will increase to 77% compared to 60% at the end of the previous year - well above the median figure Of the A-rated countries, which stands at 56%. However, it is said that Israel has persisted in reducing its debt burden, but fiscal discipline has loosened in recent years and casts doubt on the ability and willingness of the authorities to properly deal with the trend of rising debt.

According to the announcement, some external debt is low (8% of GDP), and Israel enjoys high funding flexibility. The country has a deep, liquid domestic market supported by the Bank of Israel's NIS 50 billion bond purchase program, good access to international capital markets, an active plan for the sale of bonds to Diaspora Jews, and the US government guarantee program in the event of market shocks.

Fitch further notes that Israel's external accounts remain strong. Israel has a current account surplus every year since 2003, and this surplus is expected to continue in 2021-2020. The balance of trade weakness is balanced against the high growth in services exports. In March 2020, foreign exchange reserves reached $ 126 billion. Fitch argues that Israel's status as a net lender in 2019 has dropped slightly, to 44% of GDP, but remains at a significantly higher level than the median level of A and even AA countries.

"Confirmation of the ranking in an era of unprecedented global crisis indicates the company's confidence in the Israeli economy and emphasizes the importance of maintaining fiscal discipline as we deal with the implications of the Corona in Israel," said Accountant General Roni Hezekiah.

Even in the days of Corona: Israel's credit rating was ratified at A + level