International credit rating agency Standard & Poor's latest report has kept Israel's credit rating unchanged at AA- with a "stable" outlook, saying Wednesday that it does not expect the current potential political instability to affect fiscal policies.
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However, S&P noted that if the political uncertainty remains high in the coming months, "fiscal risks could build in the medium term."
According to financial daily Globes, touching on the government's budget deficit – 12.4% of gross domestic product at the end of February – S&P said it expects it to be cut to 7.5% by the end of 2021, assuming that any government formed will strive to reduce debt.
However, S&P warned that prolonged political disputes could bring about fiscal risks that will threaten a balanced budget. If this happens, the agency said, the deficit could continue to grow, destabilizing the economy.
Israel has been without an orderly state budget for over a year, as the now-outgoing government has not been able to pass the budget bill.
Globes noted that at the same time, S&P stresses that the core strength of Israel's credit rating lies with its flexible monetary policy.
The credit rating agency's report said it expects Israel's economic growth to bounce back from the coronavirus crisis quickly.
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