The international credit rating agency's report compliments the Jewish state, saying that "the Israeli economy is resilient and dynamic, and the macroeconomic policy framework is coherent."
According to Anthony Thomas, vice president in Moody's Sovereign Risk Group, "Having eased fiscal and monetary policy to support economic activity and avoid a pronounced recession during the global crisis, the Bank of Israel is now rapidly removing its monetary stimulus in order to ensure that the recovery is sustainable and that inflationary pressures remain in check."
Additional, the report says, the high-tech exports-based economic model is performing well and underpins favorable medium-term growth prospects.
"The deterioration in the government's debt metrics was relatively limited during the global crisis and evidence that repair is underway is emerging as the budget deficit is narrowing," adds Thomas.
According to the report, the recent political unrest across the Middle East has highlighted the geopolitical risks Israel is dealing with. "The unrest has thus far been motivated by internal political discontent in neighboring Arab countries and could potentially have fiscal repercussions for Israel if defense spending had to be increased."
"However," notes Thomas, "we are less concerned about Israel's fiscal well-being than we are about the potentially negative consequences for investment and territorial security."
Nonetheless, Moody's "moderate" assessment of event risk also reflects Israel's good track record in coping with geopolitical challenges.
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