Sources inform ''Globes'' that Minister of Finance Yuval Steinitz met Moody's Rating Services executives over the weekend, and in an extraordinary step, implored them to upgrade Israel's credit rating. Moody's currently gives Israel an A1 rating with a "Stable" outlook.
The sources added that Steinitz explained his request by citing various factors. He mentioned Israel's economic soundness and its resilience in coping with the latest global economic crisis, both at the non-financial level, where there has been no sharp decline in growth or jump in unemployment, and, more particularly, at the financial level, where there is no domestic crisis and the banks and insurance companies are stable.
Steinitz also mentioned the offshore oil and gas discoveries, which are expected to generate NIS 600 billion in government revenues through 2040, which will boost Israel's fiscal stability. He noted that, since April 2008, when Moody's upgraded Israel's rating to A1, there has been a further decline in one of the rating's most important factors - the debt-to-GDP ratio. He said that Israel's debt-to-GDP ratio fell from 78% to 73% at the end of 2011, while this ratio has shot up in most Western countries.
However, there is little room for optimism. Just last week, Moody's downgraded the credit ratings of six European countries - Italy, Malta, Portugal, Slovakia, Slovenia, and Spain. It also downgraded the outlooks of Austria, France, and the UK - three countries with AAA ratings - to "Negative". This increases the likelihood of a rating downgrade within two years.
Moody's pessimism about Europe suggests that, notwithstanding Steinitz's arguments, it is unlikely to rush to upgrade any country's rating with a new global economic crisis bearing down.
It should be pointed out that Israel has specific problems, including the fact that it is an open economy and very exposed to global developments. Israel's exports will likely take a beating. Geopolitical ferment and Iran's nuclear arms program provide good reasons to raise Israel's risk rating.
It should also be noted that the Ministry of Finance has already announced that the 2012 deficit target set in the original budget will be exceeded by at least 50%, rising from 2% of GDP to 3.4%.
Published by Globes [online], Israel business news - www.globes-online.com - on February 20, 2012
© Copyright of Globes Publisher Itonut (1983) Ltd. 2012