Fitch defends Israel’s A+ credit rating amid overhaul fears

Fitch Ratings defends its decision to buck widespread pessimism on Israel’s economy over the judicial overhaul and maintain the country’s A+ credit rating.

In an interview with Bloomberg, Cedric Berry, Fitch’s lead analyst on Israel, says the agency believes the overhaul has been sufficiently watered down so that it won’t cause long-term damage.

He also does not see Israel electing another hard-right government again.

“Even if Israel’s government lasts four years, it’s unlikely that a similar coalition would be formed afterward, so it would take a very strong reform drive to inflict a significant amount of damage,” Berry says.

He also downplays a drop in investments and a trend of high-tech companies and workers relocating abroad.

“Even if there is a bit of movement outwards of talent and capital, there is still quite a lot of activity that will remain in Israel and be sufficient to drive the economy,” Berry says. “It’s always a question of scale.”

“One of the big questions for the future of Israel is whether uncertainty is temporary or a sign of a structural change in investor perception,” he tells Bloomberg. “It would likely require a stronger and a more detrimental reform agenda from the government to structurally change that perception.”