Fitch sees no sudden Israel ratings hit from Gaza

By Peter Apps

LONDON (Reuters) - Credit ratings agency Fitch said on Monday it saw no immediate ratings impact on Israel from the country's airstrikes into Gaza and that it was too soon to say whether there would be a longer-term macroeconomic impact.

Head of Middle East and Africa sovereign ratings Richard Fox told Reuters Fitch was more interested in Israel's slowing economy, budget and debt picture, as well as the outcome of Israeli elections and any shift in U.S. policy toward the region.

"It is too soon to say what the long-term impact will be or how long this will go on for them but I certainly wouldn't see an immediate impact," he said in a telephone interview.

"Israel's rating is quite low precisely because of this sort of violent instability that can erupt without much warning. Obviously, if there is a prolonged incursion into Gaza there will be budgetary implications but it is not the main thing we are looking at."

Israeli warplanes hit targets in Gaza for a third day on Monday in the deadliest violence in the Palestinian territories in decades, with speculation rising of ground action and calls for restraint from around the world.

The Israeli shekel fell more than 1 percent to a two-week low against the dollar on Monday, pressured by the Gaza violence, before trimming losses against the broadly weaker U.S. currency.

Fitch rates Israel as "A" with a stable outlook, having upgraded it in February -- before the most recent stage of the global financial crisis -- citing a revitalized economy and falling public debt which had hit an all-time low of just over 80 percent of gross domestic product.

"The economy is slowing anyway and this (the Gaza violence) will not help but the debt dynamics are improving," he said. "Those are the things that we are much more focused on."

He said he did not expect Israel to suffer the same kind of investment flight seen by Russia in the aftermath of its brief war with Georgia in August.

"The bottom line is these things are much more expected," he said. "The closest comparison would be the Israel-Lebanon war in 2006 -- although this seems much smaller. The Lebanon war did not have any credit rating impact either."

Even on the political front, he said events in Gaza were not the main focus.

"Obviously, this will have political implications but what is more important is how the new American administration approaches the wider issues," he said. "And nothing will happen until we get the Israeli election out of the way."

(Editing by Andy Bruce)