S&P says Israeli political instability does not affect credit rating … yet

Although Israel’s state of political instability appears poised to continue, the country’s fiscal position is unlikely to be affected anytime soon, ratings agency S&P said in a note Tuesday, indicating that it would not downgrade the rating of the Jewish state.

S&P warned, however, that if political uncertainty persisted, the stalemate in the Knesset could make it more difficult for policymakers to reach consensus on economic issues.

“Fiscal risks could accumulate if the search for consensus on a balanced fiscal policy proves difficult due to the persistent fragmentation of domestic policy,” the bulletin said.

The agency also said it expects growth to pick up soon and praised Israel for its sound debt policy, which it says continues to justify its rating of AA- / Stable / A-. 1+. But he warned that a future government will need to put more emphasis on “fiscal consolidation” beyond this year to avoid a further increase in the debt burden.

The ballot was released after last week’s elections – the fourth in two years – ended inconclusive, with a fifth round seen as a growing possibility due to both Prime Minister Benjamin Netanyahu and the lack of a clear path to form a government.

Finance Minister Israel Katz at Ichilov Medical Center in Tel Aviv, December 20, 2020 (Miriam Alster / Flash90)

Finance Minister Israel Katz called the document an “expression of confidence” in the Israeli economy.

“Now we need to stabilize the political system and push forward laws and reforms that will revive the economy and economic growth,” Katz wrote on Twitter.

In December, a senior director of S&P told The Times of Israel that while political instability is hampering Israel’s ability to control spending this year, the country is at “”real risk”Of a degradation of the notes.

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