Leading rating agency Moody's on Friday raised Israel's economic outlook to positive from stable, affirming the country's credit rating at A1.
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The US agency pointed to the Jewish state's strong economic growth and the government's "reform agenda" on challenges such as labor productivity and the participation of underrepresented communities in the workforce.
Israel had earned a "positive" outlook from Moody's in July 2018, before being downgraded to "stable" in April 2020 when the COVID-19 pandemic began to gather pace in the country.
In 2021, Israel's economy grew by 8.1%, beating forecasts and marking Israel's highest financial growth rate in 21 years, according to data released in February by the Central Bureau of Statistics.
According to the data, the fiscal fourth quarter of 2021 saw a staggering 16.6% GDP growth, bringing the annual average to 8.1%, the highest since 2000, when Israel's growth rate was soaring at 8.4%.
The Bank of Israel had estimated that the growth rate would reach 6.5% in 2021, while more optimistic estimates from the Finance Ministry indicated growth of 7.1%.
In December, the OECD said Israel's economy beat all forecasts to rebound strongly in 2021, citing the country's ongoing booster vaccination campaign, a recovering labor market and a booming local tech sector.
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The country's annual inflation rate hit 3.5% in February, the highest since 2011, from 3.1% in January, and above the central bank's target of 1% to 3%.
The Bank of Israel is therefore expected to announce an interest rate hike next week to fight inflation.
"It remains to be seen whether the government will stay in power to implement its comprehensive reform agenda alongside prudent fiscal policies," Moody's warned, following the defection of coalition chairwoman Idit Silman last week.
This article was first published by i24NEWS.
