Moody’s Upgrades Israeli Gov’t Outlook Rating to Positive

The government of Israeli Prime Minister Naftali Bennett got a much-needed boost Saturday when global credit rating agency Moody’s Investors Service upgraded its rating of the government’s outlook from stable to positive while maintaining its sovereign credit rating at “A1,” Israel’s Finance Ministry announced over the weekend. Moody’s said the government’s reform agenda and expectation of a further reduction in its debt ratio, aided by strong economic growth, were key drivers for the upgrade in outlook. The reform agenda, Moody’s noted, addresses Israel’s longer-term challenges of moderate productivity growth and the relatively low labor participation of some groups in the population (particularly ultra-Orthodox men and Arab women). Last year, Israel’s fiscal metrics improved faster than expected, and tax revenues were strong, against the backdrop of solid and resilient growth, while coronavirus-related expenditures tapered off. Moody’s expects that Israel will have a 2022 budget deficit amounting to 3.4% of GDP, which beats the government’s target of 3.9%. The outlook had been downgraded from positive to stable in April 2020 due to a high deficit, the COVID-19 pandemic, and ongoing political instability.