International rating agency Moody's predicts that the new government in Israel led by Benjamin Netanyahu, still in the process of formation, will last longer than the outgoing government. Moody's sees the trend of improvement in the fundamentals of Israel's credit rating continuing thanks to greater political stability and a continued rapid recovery from last summer's Operation Protective Edge.
”Although the precise compromises that will be reached in the new budget are not yet known, since the probable choice for finance minister will be new to the post, the government’s fiscal rules should contain spending growth and keep credit metrics for Israel (A1 stable) on their well-established improving trend, a credit positive," analysts Kristin Lindow and Pamela Reyes Herrera write.
A government source told "Globes" today, commenting on Moody's announcement, "This is a positive announcement. It can almost be called a 'God speed' for Netanyahu."
The survey, which was sent last night to Moody's customers, analyses the consequences of Benjamin Netanyahu's election victory for the Israeli economy. It predicts greater cohesion in economic policy. Moody's adopts the prevailing view in Israel that Kulanu leader Moshe Kahlon will become minister of finance, but says his economic outlook is not opposed to that of Netanyahu's Likud party. "Although the dominant issue in Mr. Kahlon’s own campaign was the high cost of living chiefly related to the issue of housing costs, this stance is not antithetical to Likud’s economic views. On the other hand, clashes between these two parties in the anticipated coalition could still occur over time should attempts to overcome the scarcity of available land - the key element keeping house prices high - begin to challenge vested interests," Moody's note says.
Moody's sees a fiscal deficit in 2015 lower than the 2014 deficit in Israel, which was 2.9% of GDP. The agency's analysts believe that because of the delay in passing the 2015 budget, the new government will introduce a single budget for 2015 and 2016, which will mean considerable savings of time and political resources.
For all its upbeat response to the election result, Moody's still warns that "the negotiations over the budget will not be easy - they never are in Israel given the diversity of interests in any coalition."
Published by Globes [online], Israel business news - www.globes-online.com - on March 23, 2015
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