WarSclerotic

Moody’s affirmed Israel’s A1/(P)A1 international credit ratings and stable outlook Thursday, commending the government for its budgetary discipline and reforms.

In 2008, the credit rating agency upgraded Israel’s rating to A1 and it has held steady since. The company said that Israel’s high standing was made possible by the overall fiscal health of the economy, the government’s move to rein in spending and the austerity measures it had introduced.

“The first factor driving the affirmation of Israel’s A1 government bond ratings relates to its economic resiliency,” Moody’s Investors Service said on Thursday in its Ratings Action report for Israel, noting that despite suffering a drop in demand for its exports in Europe, the Israeli economy had successfully weathered the global financial crisis and would likely enjoy a boost from newly tapped gas fields.

“The second driver for affirming Israel’s rating is the continued reduction in the government’s debt-to-GDP ratio, which contrasts sharply against trends in many other advanced country peers,” the analysts wrote, noting the government’s passage of the 2013 and 2014 budget was a welcome development in light of the “upward revisions of the government deficit targets.”

The agency’s economists further noted that Israel’s economy would benefit from the social reforms aimed at integrating the Arab women and the ultra-Orthodox community in the workforce, citing the new bill to draft haredi men.

“The effort is registering success, and is expected to make further progress as military exemptions and social welfare grants are scaled back under the coalition government that took office in March 2013,” they wrote. “The country’s high-tech niche and entrepreneurial culture have continued to underpin its latent dynamism and attract sizeable FDI [foreign direct investment] inflows.”

Finance Minister Yair Lapid praised Moody’s decision, saying it “showed the company’s confidence in the economic agenda [of the government] and the new state budget.”

Meanwhile, Israel’s Central Bureau of Statistics reported Thursday that the Consumer Price Index went up by 0.3 percent in July, further noting that among the contributing factors was the price of alcoholic beverages, which went up by 35%.