The international credit rating company S&P confirmed over the weekend the State of Israel's credit rating on foreign currency debt, at the level of AA - with a "stable" rating forecast.
The company noted the main characteristics of the State of Israel's credit rating - including a diversified and strong economy, strong external accounts, an optimal debt structure - but added: "Political and security risks have resurfaced - the coalition has lost its narrow majority in the Knesset. Violence throughout Israel. "
S&P expects the Israeli economy to grow at a rate of 5.5% in 2022, after actually standing at 8.2% in 2021 - higher than their original forecast of 6.5%.
The company noted positively Israel's strong external accounts, which are characterized by a surplus in the balance of payments and high foreign exchange reserves, which are supported by a strong high-tech sector. Limited on the Israeli economy.
Expected deficit: 3% in 2022
According to an S&P announcement, Israel's fiscal performance is strengthening after the deterioration in indices as a result of the corona crisis.
The deficit in 2021 improved significantly compared to its predecessor in 2020, in light of an increase in tax revenues at a nominal rate of 19%, an unprecedented figure compared to an average annual increase of 5% in the decade before the crisis.
The company predicts that the government deficit in 2022 will be 3% and in the medium term 2.5%, and the net debt-to-GDP ratio, which jumped to 68% in 2020, is expected to be 58% by 2026.
As for inflation, the rating company expects an average rate of 3.8% in 2022, noting that it is significantly lower than most developed countries - thanks to Israel's natural gas production, which balances the impact of global energy price increases.
Regarding the geopolitical arena, S&P praised diplomatic relations with the UAE, Bahrain, Morocco and Sudan, but also mentioned recent security incidents - a series of internal violence, clashes with Hamas in May 2021 and tensions with Iran - limiting credit ratings.
At the same time, the company mentioned that historically the impact of such events on the economy is limited.
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