Bethel Finances: Midroog: Israel's rating not in danger

www.bethelfinance.com

"The State of Israel faces major geopolitical threats, but its credit rating is not in danger," said Midroog Ltd. SVP Avital Bar-Dayan at joint conference of "Globes", Midroog, and the Association of Publicly Traded Companies in Israel. The conference was held last week at the Tel Aviv Stock Exchange (TASE) as part of a debt market forum on "The earthquake in the Middle East - possible consequences on the economy and capital market."

Bar-Dayan surveyed Israel's credit rating over the years. She said that crises such as the wars in Lebanon and Gaza, Operation Defensive Shield, the global economic crisis, and the current instability in the Middle East did not affect Israel's rating, which remained stable, and was even raised by all the rating agencies in 2008.

Moody's, Midroog's parent company, gives Israel has the highest rating in the region - A1 - except for oil exporters Saudi Arabia (Aa3), Kuqiat (Aa2), and Bahrain (A3). For the sake of comparison, Egypt's rating is B3, Jordan's is Ba2, Lebanon's is B1, and Turkey's is Ba2. Some Middle Eastern countries do not issue government bonds, such as Iran, Iraq, and Syria, so they have no credit rating at all.

Bar-Dayan said that the main considerations for a country's credit rating are its GDP per capita, size, diversity of industries, investment in human capital, and innovation. Other measures include the rule of law, good governance, and transparency. The rating agencies also examine a country's financial soundness, its maneuvering room for repaying government debt, and financial, economic, and geopolitical risks.

Bar-Dayan said, "Israel's economic factors even support an AA rating. The geopolitical risk lowers the overall rating, and it is necessary, in addition to economic measures, to take creative steps to ameliorate the political risk factor, including through economic cooperation with Arab countries." She added, "Moody's believes that Israel faces major geopolitical threats, but that the country has the capacity to recover and return to the path of growth."