Moody's upgrades Israel's outlook to positive, affirms A1 rating

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A woman feeds birds in her daily sunset ritual on her rooftop in Tel Aviv, Israel, November 20, 2017. REUTERS/Corinna Kern

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April 8 (Reuters) - Global ratings agency Moody's on Friday upgraded Government of Israel's outlook to "positive" from "stable" and affirmed sovereign credit rating at "A1"

Moody's said the key drivers for the change in outlook included the government's reform agenda that aimed to address longer-term challenges and the agency's expectation of a further reduction in the government's debt ratio.

Israel's economy grew 8.2% in 2021, above forecasts by the country's central bank, after a 20.2% contraction in 2020. Israel's annual inflation rate hit 3.5% in February, the highest since 2011. read more

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The Bank of Israel is expected to hike its interest rates next week, the first tightening in over a decade, to combat rising inflation from strong economic growth and labor market.

Israeli Finance Minister Avigdor Lieberman announced earlier this week the country's budget deficit likely fell to between 1.5% and 1.6% of gross domestic product in March, and that he intended to cut petrol taxes due to spiking fuel costs. read more

The agency also said Israel's affirmation of A1 rating balances the economy's growth prospect and resilience against the government's relatively high public debt burden.

Moody's also noted that the Government of Israel's debt affordability metrics were somewhat weaker than its peers.

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Reporting by Shreyaa Narayanan in Bengaluru; Editing by Shinjini Ganguli

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