The Tel Aviv stock market rose on Monday as U.S. credit rating agency Fitch Ratings maintained Israel’s A+ rating with a “stable” outlook, while the shekel appreciated versus the dollar and the euro.
According to Fitch, “Israel’s ‘A+’ rating balances a diversified, strong, high-value-added economy with strong external finances against a relatively high government debt/GDP ratio, ongoing security risks, and a history of unstable governments that has hampered policymaking.
According to the firm, it is unclear how the government’s initiative to reform the legal system will affect Israel’s credit metrics in the future, but it may have a negative effect “if the weakening of institutional checks leads to worse policy outcomes, sustained bad investor sentiment, or weakens governance indicators.”
The present judicial reform initiatives, according to Fitch, “are unlikely to spark a material exodus of talent and capital in the high-tech sector,” they stated. Prior to the release of the most recent study, the company spoke with a number of Israeli economic authorities, and one of its economists traveled to Israel last month to discuss progress on judicial reform.
According to a joint statement from Prime Minister Benjamin Netanyahu and Finance Minister Bezalel Smotrich, “The approval of Israel’s credit rating at the level of A+ and the leaving of the outlook at stable reflect what we have been saying constantly: Israel’s economy is strong, stable, and solid.
When Fitch Ratings released a special update on Israel in May, it praised the country’s robust economy but voiced concern that the country’s A+ sovereign credit rating would be harmed by the judicial reform drive. While maintaining Israel’s “stable” A1 rating last month, the international credit rating agency Moody’s also issued a warning about “negative consequences” for the nation’s economy and security as a result of the passage of significant judicial reform legislation.
In the meantime, the Jewish state’s creditworthiness was revised by Morgan Stanley Investment Bank and Financial Services, which downgraded its sovereign credit rating to a “dislike stance.”
As a result of the judicial reform initiative, Moody’s altered Israel’s outlook rating from “positive” to “stable” in April.
The company also confirmed the country’s A1 rating, which reflects the nation’s “strong economic growth and improving fiscal strength, which Moody’s expects to continue in its baseline scenario.
At the time, Standard & Poor’s, now known as S&P Global Ratings, kept Israel’s credit rating at AA-, which Netanyahu described as “an expression of confidence in the right economic policy that we are leading.”