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Warren Buffett: Israel Bonds Are “A Deserved Endorsement of a Remarkable Country”

Warren Buffett, participating in his second Israel Bonds event in less than a year, said investing in Israel bonds is “a deserved endorsement of a remarkable country,” adding, “I like backing winners and am happy to own the bonds of Israel.”

Sharing a moment are, from left: Bonds President & CEO Israel Maimon;
developer Larry Silverstein; Warren Buffett; and Bonds Vice President
for Sales Stuart Garawitz

The famed ‘Oracle of Omaha’ came to New York June 15 and addressed Israel bond investors from the United States, Brazil, Canada and Mexico, each of whom agreed to make a new minimum Israel bond investment of between $1 million and $5 million to participate. Buffett spoke at an intimate luncheon at the World Trade Center and a dinner at a private club in Manhattan.  Developer Larry SIlverstein welcomed luncheon guests, and David Rubenstein, co-founder and co-CEO of the Carlyle Group, greeted attendees at the evening event.

Enjoying lunch with the 'Oracle of Omaha' at the World Trade Center

Accolades for Buffett came from Israeli Prime Minister Benjamin Netanyahu and Finance Minister Moshe Kahlon.  The prime minister who, in addition to recording a tribute video, wrote, “As one of the world’s most successful leaders in business, your words and actions are closely followed and emulated. Your personal investment in Israel bonds is a powerful endorsement.”

Bonds President & CEO Israel Maimon presents Warren Buffett with a framed letter of appreciation from Prime Minister Benjamin Netanyahu

Finance Minister Kahlon praised Buffett’s “unwavering confidence in Israel – its creative spirit, forward-looking attitude and, of course, its strong, resilient economy. We take pride in calling you a friend.” The Finance Ministry was represented by Accountant General Rony Hizkiyahu.

Finance Ministry Accountant General Rony Hizkiyahu with Warren Buffett at the World Trade Center luncheon

Israel Bonds President & CEO Israel Maimon told Buffett, “Your personal investment in Israel bonds underscores your belief in the Jewish state and the resilience of its economy.”

Buffett’s presence in New York was a follow-up to a dinner held in Omaha last November.  Events in the two locales resulted in a combined total of over $210 million in Israel bond investments and indications to invest.

Additionally, participants were given a private tour of the World Trade Center complex, hosted by Larry Silverstein, founder and chairman of Silverstein Properties and developer of One World Trade Center. Tour participants included Israel’s UN Ambassador Danny Danon.

UN Ambassador Danny Danon speaks during a visit to the World Trade Center, hosted by Larry Silverstein

Buffett’s New York appearance on behalf of Israel Bonds generated global media coverage, samples of which can be viewed here. It also trended extensively on Twitter and other social media.

Bonds President & CEO Israel Maimon and Warren Buffett engage in
a friendly tussle over the famed investor's wallet

Photos:  Shahar Azran/Mark Von Holden

The Israel Bonds Maimonides Delegation



(The 5th Maimonides Medical Delegation to Israel took place March 5-9. Following are the impressions  and insights of delegation co-chair and national board member Dr. Andrew Hutter)
From March 5-9, 24 physicians, many accompanied by spouses, spent an exciting four and a half days touring Israel from north to south as members of the 5th Israel Bonds Maimonides Delegation. I was proud to co-chair the delegation with Dr. Burton Herbstman.
We began at the Elma Art and Music Resort near Zichron Yaakov, where we were welcomed by Bonds President and CEO Israel Maimon. The next day, we explored the north, beginning at Kfar Tikva, a kibbutz for mentally challenged adults, meeting with many residents and the management team.The entire community embraces the residents, many of whom work at local businesses. 
Health Minister Rabbi Yaakov Litzman speaks to the delegation at Hala: the Rachel Nash Jerusalem Comprehensive Breast Clinic
Health Minister Rabbi Yaakov Litzman speaks to the delegation at Hala: the Rachel Nash
Jerusalem Comprehensive Breast Clinic

We then proceeded to the Tulip Winery, after which we traveled to the Poriya Medical Center, viewing its state-of-the-art emergency room and underground hospital for use in case of missile attacks..The doctors then broke into groups to meet with their peers, based on specialty. 

Visiting Poryia, a state-of-the-art emergency room and underground hospital
Visiting Poryia, a state-of-the-art emergency room and underground hospital
The chairman of orthopedics was an Israeli Arab, who introduced the orthopedic surgeons in our group to a patient from Syria suffering shrapnel injuries to one leg and a below-the-knee amputation on the other. He was awaiting fitting for his prosthesis and seemed very appreciative of the care he received. We completed our tour of the north by meeting with IDF Colonel (Res.) Kobi Maron of the Golani Brigade in the Golan Heights.
Observing training for IDF combat medics
Observing training for IDF combat medics

Tuesday was spent in Tel Aviv, viewing the medical simulator at Tel Hashomer Sheba Medical Center and attending the MEDinISRAELl convention to see new medical hi-tech innovations.  
The delegation's clear highlight came at Halutza, a true pioneer community just 450 yards from the Egyptian border and only a few miles from Gaza. We saw the brand-new medical center that will provide basic medical services for the community, thus avoiding traveling over an hour to Beersheba for treatment. We also saw the community’s hi-tech farming, which is not only turning the desert green, but also creating a successful agricultural hub growing many different fruits and vegetables. Additionally, there was a yeshiva in Halutza for children with ADHD who work the fields in the morning and attend classes in the afternoon.

Delegates gather for a group photo at the southern border community of Halutza
Delegates gather for a group photo at the southern border community of Halutza
The trip ended in Jerusalem, where we packed Shaloch Manot baskets at Ohr Meir and Bracha, an organization supporting over 400 families who were victims of terror. We then proceeded to Hala: the Rachel Nash Jerusalem Comprehensive Breast Clinic, to view state-of-the-art breast cancer detection and screening, where  women can get testing, and, if necessary, a biopsy done in a single day. While at Hala, we had the honor of meeting  with Health Minister Rabbi Yaakov Litman.

Preparing to wrap gift baskets at Ohr Meir and Bracha, an organization supporting victims of terror attacks
Preparing to wrap gift baskets at Ohr Meir and Bracha, an organization supporting
victims of terror attacks

Following the closing dinner, the group dispersed, some to return home and others to enjoy a few extra days in Israel. Great bonding experiences were had among the participants, all of whom pledged to share the story of this great country.

International Prime Minister's Club Weekend 2017


Israel Bonds officially launched its 2017 sales effort at the gala International Prime Minister’s Club Weekend, held February 9-12 in Miami Beach, Florida. The weekend had numerous highlights, including:

  • 'Latin Night' under the stars featuring the Miami Symphony Orchestra
  • An exciting New Leadership ‘Blue and White Party’ at Villa Casa Casuarina, the former Versace Mansion
  • A fond farewell to outgoing Finance Ministry Accountant General  Michal Abadi and former President & CEO Izzy Tapoohi

The weekend culminated with a gala dinner paying tribute to 13 honorees from the U.S., Canada and Mexico, which was emceed by Seinfeld’s Jason Alexander and attended by over 600 people.
Israeli Prime Minister Benjamin Netanyahu offered video greetings, observing, “Israel bonds are both a financial instrument and a fraternal instrument, a bond of brotherhood and sisterhood with the Jewish state, for Jews and non-Jews alike.” He added that investors in Israel bonds are “(Israel’s) ambassadors.”
Israel Bonds President & CEO Israel Maimon shared a statement from Finance Minister Moshe Kahlon which read, “Since its founding, Israel Bonds has been a cornerstone of Israel’s economy. Crossing the $40 billion mark (in worldwide sales) exemplifies the organization’s dedication to Israel, and the way in which its message of economic support has resonated on a global scale.”

Emcee Jason Alexander shares his experiences growing up Jewish and his feelings for Israel
Emcee Jason Alexander shares his experiences growing up Jewish and his feelings for Israel (Photo: Shahar Azran)

Israeli dignitaries participating in the International Prime Minister’s Club Weekend included UN Ambassador Danny Danon; Consul General of Israel in New York Ambassador Dani Dayan; Consul General of Israel in Los Angeles Sam Grundwerg; and Consul General of Israel in Florida Lior Haiat. The Finance Ministry was represented by Director General Shai Babad; Deputy Accountant General Yali Rothenberg; and former accountant general Michal Abadi.
Symphony under the stars at 'Latin Night'
Symphony under the stars at 'Latin Night' (Photo: Shahar Azran)

Honorees recognized at the dinner were:

  • Sharon Azrieli, Montreal
  • Jeffrey Beck and Jarrod Beck, Dallas
  • Bonnie and Chuck Berk, Atlanta
  • Israel Feldman, Mexico City
  • Monique and Alex Halberstein, Miami
  • Sharon and David Halpern, Livingston, NJ
  • Sarah and Elie Hirschfeld, New York
  • Suellen and Larry Kadis, Cleveland
  • Melanie and Rene Moreno, Washington, DC and Curaçao
  • Barry Shrage, Boston
  • Dr. Tobi Richman Steinhardt and Rabbi David  Steinhardt, Boca Raton
  • Diana Sager and Dr. Steven Warren, Tampa Bay
  • Enid and Kalman Wenig, Chicago

Two additional honorees, Alan Kantrowitz and Richard Ziman, both of Los Angeles, were unable to attend.

The scene at the New Leadership 'Blue and White Party, held at Villa Casa Casuarina, the former Versace Mansion
The scene at the New Leadership 'Blue and White Party, held at Villa Casa
Casuarina, the former Versace Mansion (Photo: David Heischrek

Sales announced that evening – encompassing individuals who had invested in Israel bonds, invested that night or indicated an intention to invest- totaled $260 million.

Izzy Tapoohi,
From left: Bonds President & CEO Israel Maimon; former President & CEO
Izzy Tapoohi; outgoing Finance Ministry Account General Michal Abadi;
Chairman of the Board Richard Hirsch; Vice President for Sales Stuart
Garawitz (Photo: Shahar Azran)


Finance Minister Offers Praise as Global Israel Bond Sales Exceed $40 Billion


When David Ben-Gurion (pictured below) stood before a packed house at New York's Madison Square Garden to launch the inaugural issue of Israel bonds, even the visionary prime minister could not have foreseen the extraordinary success of the new venture.

In January, Israel Bonds surpassed $40 billion in worldwide sales since the first bonds were issued in 1951. The momentous accomplishment was the second milestone for the Bonds organization in less than three weeks - on December 31, U.S. sales for 2016 ended with an all-time high of more $1.127 billion.

Israeli Finance Minister Moshe Kahlon praised the achievements, saying, “Since its founding, Israel Bonds has been a cornerstone of Israel’s economy. Crossing the $40 billion mark exemplifies the organization’s dedication to Israel, and the way in which its message of economic support has resonated on a global scale. On behalf of the government of Israel, I wish to thank Israel Bonds and its worldwide client base for helping to build every sector of our economy.”

Rony Hizkiyahu, the Finance Ministry’s new accountant general, said, “Israel Bonds is an important element of Israel's debt management policy, and has been mentioned as a credit strength by our rating agencies*. The organization's long-lasting contribution is yet another example of the decades-long economic partnership between the Diaspora community and Israel.”

Israel Bonds President & CEO Israel Maimon added, “The historic sales clearly show that throughout successive generations, the idea of demonstrating confidence in Israel through investing in Israel bonds has touched a response chord with individuals from all walks of life.”

(*Israel bonds are not rated)

Ben Gurion Poster

A poster announces David Ben-Gurion's appearance at New York's Madison Square Garden for the launching of Israel Bonds. Even the visionary prime minister could not have foreseen the extraordinary success of the new venture.

2016 News


International credit rating company Fitch upgraded Israel's rating to A+ as the agency predicts that the country will remain stable.

International credit rating company Fitch upgraded Israel's rating to A+ with a stable outlook. The upgrade is a result of the reduction in the ratio of the public debt to gross domestic product (GDP). The company also warned that political tensions within the coalition can be hard to control and could lead to sudden elections.

Fitch also explained that Israel's credit rating will continue to be restricted by political and security risks such as the wave of lone-wolf terrorist attacks in Israel since September 2015.

"The rise of Israel's credit rating is a certification of excellence for Israel's economic strength and the economic policy that we lead," stated Israel's Minister of Finance Moshe Kahlon.

Moshe Kahlon
Moshe Kahlon

Photo Credit: Yonatan Sindel\Flash 90

Warren Buffet pledges $5 million investment in Israel bonds

'Oracle of Omaha' Warren Buffett says: 'I believe Israel is going to be around forever.'

And he puts his money where his mouth is.

Berkshire Hathaway Chairman and CEO Warren Buffett welcomed 43 U.S. Israel bond investors to Omaha on Sunday, each of whom made a minimum $1 million new investment to participate in an exclusive evening with the famed "oracle of Omaha."

The evening opened with a tribute video from Israeli Prime Minister Benjamin Netanyahu, who said, "Warren is one of the most brilliant and successful investors of our time. He knows a good investment when he sees it. That's why he invests in Israel."

Buffett, who made Israeli company Iscar his first overseas acquisition, spoke warmly of the Jewish state, calling it "a remarkable country." He stressed that "The United States and Israel have a common destiny," saying, "If you are looking for brains, energy and dynamism in the Middle East, Israel is the only place you need to go."

Buffett also spoke positively of investing in Israel bonds, calling the investments "a terrific tribute to the country." He said he would invest $5 million in Israel bonds in his personal portfolio if participants at the event matched his investment. In doing so, Buffett stated, "I wanted - through the last-minute challenge - to set the bar even higher for future events."

He added, "You can tell prospective investors that I would have taken a perpetual bond if you had offered one. I believe Israel is going to be around forever."

As a result, Israel bond sales directly attributable to the event totaled $60 million. In addition to Buffett's $5 million investment, Berkshire Hathaway's portfolio has included Israel bonds since its acquisition of GUARD Insurance in 2012, now known as Berkshire Hathaway GUARD Insurance Companies.

In expressing appreciation to Buffett, new Israel Bonds President & CEO Israel Maimon said, "This event tells me that Warren Buffett, famed for his investment expertise, continues to view Israel as a sure bet."


Israel ranked 2nd most innovative country

Business Insider has rounded up the 15 highest ranked countries in the world for innovation, based on the World Economic Forum's Global Competitiveness Report on the state of the world's economies. Based on this, tiny Israel is ranked second in the world!

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"A Hotbed of Technology"

An October 26, 2016 article on notes, "Israel's Silicon Wadi is bringing in billions from investors." The article goes on to call Israel "a hotbed of technology start-ups that's drawing billions in investment from foreign companies and venture capital firms."

S&P, Moody's Confirm Israel Ratings

In separate reports issued in August, S&P* and Moody's* both affirmed their ratings for Israel. In explaining its decision to keep its 'A+/A-1' long- and short-term foreign and local currency sovereign credit rating,with an outlook of 'stable,' S&P cited "Israel's prosperous and diverse economy, strong external balance sheet, and flexible monetary framework."

Similarly, Moody's reaffirmed its A1 rating, noting Israel's "durable economy and robust institutions, which have enabled the country to successfully weather global and domestic shocks as well as geopolitical challenges with limited disruption to its economic stability."

Moody's added, "Furthermore, Israel can also depend upon financial support from the global Jewish community, mainly via the Israel Bonds program, and the U.S. government, especially in an emergency."

Read the S&P report and the Moody's report.

Debt-to-GDP Ratio Continues to Fall

According to an August 17 Haaretz article, Israel's 2015 debt-to-GDP ratio - one of the most significant indicators of a nation's economic well-being - has been revised downward from 64.9 percent to 63.9 percent.

Positive Economic News for Israel

Even as the global economy continues to be unstable, positive economic news for Israel keeps coming. According to an article posted August 17, on the Israeli business site Globes, Israel's Q2 GDP rose 3.7 percent, for adjusted overall first half growth of 2.9 percent.

Fitch Cites "Active Bond Program"

On April 21, 2016, Fitch Ratings Agency* upgraded Israel's long-term outlook from 'stable' to 'positive.' The Fitch report also cited the Israel Bonds enterprise, noting that Israel can rely on "an active Diaspora bond program and US government guarantees in the event of market disruption."

Changing the narrative

Izzy Tapoohiby Izzy Tapoohi
President & CEO of Development Corporation for Israel/Israel Bonds.

“With GDP growth averaging nearly four percent since 2003, Israel is consistently one of the strongest performers in the OECD.”

Investing in Israel bonds is an expression of confidence in Israel’s modern- day economy, which has proven, on a global scale, to be among the world’s most resilient. As other economies falter, Israel’s remains strong, and more and more investors – Jewish and non-Jewish, individual and institutional – have come to realize and appreciate the value of Israel bonds as important additions to financial portfolios.

The fact that annual US sales alone have exceeded $1 billion for each of the past three years underscores this point.

Underpinning the sales is the fact that at Israel Bonds, we have changed the narrative from the geopolitical to the economic – a concept that has resonated with investors of all kinds who want to become stakeholders in Israel’s robust economy.

This past January, Organization for Economic Cooperation and Development (OECD) Secretary General Angel Gurría paid an official visit to Israel. He declared, “With GDP growth averaging nearly four percent since 2003, Israel is consistently one of the strongest performers in the OECD.”

That same month, Israel announced its debt-to-GDP ratio – a key indicator of the health of a nation’s economy – had decreased for a sixth consecutive year, and now stands at 64.9%. This success, which has been achieved by only one other country over the same time span, earned Israel widespread praise from ratings agencies and financial analysts.

Moody’s, for example, hailed this achievement by stating that “Israel is one of the few advanced countries that has a lower debt-to-GDP ratio now than before the global financial crisis.”

TO SKEPTICS who point to the current instability in global financial markets and question Israel’s ability to sustain economic growth in such an environment, here is the answer, straight from a Standard and Poor’s report issued in February: “We expect the Israeli economy to weather potential volatility in the global economy and international financial market, thanks to its diversified economy, strong external position, and flexible monetary framework.”

As president & CEO of Development Corporation for Israel/Israel Bonds, I am proud that our organization is playing a substantive role in Israel’s ongoing economic success. Fitch highlighted the importance of the Bonds organization in October, noting Israel’s “financing flexibility is high, with deep and liquid local markets, access to international capital markets and an active diaspora bond program.”

Fitch’s singling out of the Israel Bonds program underscores the fact that the organization is widely recognized as a dependable, valued and strategic asset for Israel. Furthermore, the Bonds organization has taken on the additional strategic role of countering the tactics of the Boycott Divestment/Sanction (BDS) movement.

There are many ways of standing up to BDS. One of the easiest is to buy Israeli products. Every supporter of Israel should buy blue and white for themselves, and for others, whenever possible. Another is to support companies targeted by BDS activists. A third means is investing in Israel bonds, which strikes at the heart of BDS, because Israel bonds are a direct counterweight to the movement’s goal of crippling Israel’s economy.

Moreover, BDS tentacles have spread across college campuses, which have become a hotbed of anti-Israel activism.

This disturbing phenomenon can be countered by investing in Israel bonds and then donating the bonds to universities.

This would have the desired effect of frustrating BDS activists on two levels.

First, it repudiates efforts to achieve college boycotts of Israel by decisively connecting the institution with the Jewish state. Second, as previously stated, investing in Israel bonds disrupts the BDS movement’s foremost goal of harming Israel’s economy.

2015 News


Israel Bonds at Nasdaq

December 17, 2015 was a special day for Israel Bonds, as the organization was front and center at the Nasdaq Exchange. From the Nasdaq digital media wall to its tower high above Times Square, Israel Bonds was on full display.

The Israel Bonds logo prominently featured on the Nasdaq digital media wall (Photo: James S. Galfund)The Israel Bonds logo prominently featured on the Nasdaq digital media wall
(Photo: James S. Galfund)

Nasdaq Managing Director Robert Phillips praised the achievements of the Bonds enterprise by observing the organization is “widely-regarded as one of Israel’s most valued economic and strategic resources,” adding that Israel Bonds is “highly praised for its dependability.”

Bonds staff joins in the closing bell (Photo: Christopher Galluzzo)Bonds staff joins in the closing bell
(Photo: Christopher Galluzzo)

Bonds President & CEO Izzy Tapoohi spoke of the organization’s determination to secure ever- greater numbers of stakeholders in Israel’s economy, which, he noted, was “an economy of achievement and innovation that was readily apparent at NASDAQ, where over 80 Israeli companies are currently listed.”

Managing Director Robert Phillips makes a commemorative presentation to Bonds President & CEO Izzy Tapooohi (Photo: Christopher Galluzzo)Managing Director Robert Phillips makes a commemorative presentation to Bonds President & CEO Izzy Tapooohi
(Photo: Christopher Galluzzo)

Following his remarks, Tapoohi was joined by Israel Bonds staff for the closing bell.

"Investing in Israel - the Best Answer to the Boycott"

Izzy Tapoohi, Israel Bonds presidentIzzy Tapoohi, Israel Bonds president, is not indifferent in the face of BDS and is confident that the Israeli economy is stronger than anything.

Israel (Izzy) Tapoohi is probably one of the most influential people in the Israeli economy. Tapoohi, who was appointed CEO and President of Israel Bonds by Prime Minister Benjamin Netanyahu and former Finance Minister Yuval Steinitz, was preferred over other candidates mainly because of his business experience. Ahead of the new year, Tapoohi gives us a look at Israel's economy from his perspective, at the Israel Bonds organization, and also has an important message to the BDS movement and to those calling for a boycott of Israel.

Tapoohi was born in Israel and grew up in Australia, where his parents had emigrated. He holds a BA in Economics, Accounting and Business Administration from the University of Melbourne and is a certified public accountant from RMIT University. Tapoohi is a businessman and an Israeli accountant, and he brings with him a lot of managerial and business experience to the position of CEO of the Israel Bonds, after having managed many companies and having served as Chairman of the Board of Directors of Bezeq and Africa Israel Investments.

What are the advantages to investing in Israeli bonds?

"Investment in Israeli bonds should be tested with relation to investment in other bonds, but certainly there are some obvious advantages to this;


Israel Bonds attracts investors who are looking for stability. The crisis in Europe, Greece and the U.S., the high debt ratios and crises in the entire world attract a lot of investors who are looking for stability to invest in Israeli bonds.

Economic Strength

Israel from a financial point of view is at an economic strength. In recent years Israel's economy has grown stronger than most European economies. Israel is an economy that has higher growth rates than most countries in the world and Europe, together with relatively low unemployment rates compared to countries in Europe.


The State of Israel is among the few countries that has always repaid its debts, completely and on time, and therefore during a period of economic fluctuations the Bonds becomes a safe investment. In addition, interest on Israeli bonds is relatively high compared to U.S. bonds due to the level of risk and the lack of marketability of the bonds, which makes it a better investment. "

When was the Israel Bonds organization founded?

The Bonds is an organization that sells bonds of the State of Israel particularly to Jews in the Diaspora. The Bonds was established in 1951 at the initiative of Prime Minister David Ben-Gurion. It is a very important enterprise and, in the 1960s, was a main source of income for the development budget. The funds raised helped many projects such as the National Water Carrier, Dead Sea Works, the Ports of Haifa, Ashdod and Eilat, the expansion of the Ben-Gurion Airport and Israel Railways, as well as improving infrastructure.

How much money does the Bonds raise a year?

The Bonds organization today raises about $1.2 billion a year, with most of the money coming from the United States. Since its establishment, the Israel Bonds organization has managed to raise about $40 billion.

So who in essence invests in Israel Bonds?

There are two types of investors, retail investors - these are individual investors and Jewish groups, this share is about 75 percent of the purchasers of the Bonds. The remaining 25 percent are institutional investors, including some of the fifty states in the United States, municipalities, financial institutions, and more. About 85 percent of the retail investment amounts to less than $25 thousand, which demonstrates the high level of distribution of the investors.

Recently, large economies have been weakened and there is uncertainty in the global market. How do you think the Israeli economy is measured, and do you think it is a strong economy?

"The Israeli economy is very dynamic, there is great development, innovation and human capital, which contributes significantly to the development of the biotech and high tech industries. Today you can add the natural gas resources which will greatly contribute to the GDP, and therefore Israel can be considered as one of the strongest economies.

And finally, what message do Bonds investors send to the BDS organization which works to boycott Israel?

"The message is that you cannot subjugate Israel and its economy will remain strong and steadfast forever. We all know that saying, that the best defense is a good offense and in a period such as the one we are in, when the BDS is trying to undermine us, it is important to invest in the Israeli economy. This is the best form of offense. It is very tempting for us to confront those people calling for a boycott, who ignore the violation of human rights in other countries, but for us, the best answer is to simply invest in Israel and strengthen it. At a time when the geopolitical situation is uncertain and slander and double standards appear day and night, we must invest and thus make an unambiguous decision for those who want to harm Israel."

2014 News


A report on Israel’s long-term foreign currency outlook* issued November 21 by Fitch ratings agency contained several points highlighting Israel’s economic resilience, including a “post-conflict rebound” as well as “rising investment.” The report singled out Israel’s “well-developed institutions (that) have led to a diverse and advanced economy.”

In a section dealing with Israel’s financing flexibility, Fitch highlighted the Israel Bonds enterprise, citing “an active Diaspora bond program.”

Commenting on the Fitch report, Bonds President & CEO Izzy Tapoohi said, “Our organization is a recognized pillar of Israel’s economy, and I am confident we will continue to be a vital, strategic asset.”

*Israel bonds themselves are not rated

March 28, 2014

S&P: Israel now a ‘high-income’ country

Strong growth, low inflation, and a stable security situation are all good signs for the Israeli economy, the ratings agency says
By David Shamah

Tel Aviv beach skyline as seen from Jaffa. (Photo credit: Gili Yaari / Flash90)
Tel Aviv beach skyline as seen from Jaffa. (Photo credit: Gili Yaari / Flash90)

Israel’s economy is doing well enough that the country can now be considered “high-income,” according to ratings company Standard and Poor’s (S&P) in its latest evaluation of the country’s fiscal state.

In its ratings statement, S&P said that with a per capita annual income of over $38,000, “we now view Israel as a high-income economy, with trend growth at the higher end of its peer income group.”

Even better news for Israelis: S&P expects that per capita income figure to grow to almost $42,000 by 2017. Just five years ago, per capita income was about $28,000.

This is due, S&P said, to Israel’s “prosperous and diverse economy,” with a good mix of manufacturing and high-tech, and also to the benefits the economy will realize as the country’s natural gas production comes online. In its statement, S&P affirmed its long- and short-term foreign and local currency sovereign credit ratings for Israel at A+/A-1.

Israel’s economy is stable, and its prospects for growth are good, the agency said. GDP is expected to grow 3.2% in real terms in 2014, and a similar rate of growth is expected over the next three years as well.

Aiding that growth is the extra effort the government is putting in to reduce debt as a percentage of GDP. Currently that figure is at 67%, which is considered reasonable by international standards, and it is expected to drop to 61% by 2017, especially if interest rates don’t go up too much. Inflation is expected to remain low, as well, with annual rates of between 1.4% and 2.5% predicted through 2017.

Two factors have been holding Israel back. Geopolitical risks, of course, are always a factor, but unless things significantly deteriorate, the security issues are not expected to have a major impact the economy. If anything, the agency said, “recent [geopolitical] trends have been favorable to Israel.” Nonetheless, S&P said, “We could consider raising our ratings on Israel if it makes material progress in defusing external security risks. In our view, such progress would have positive implications for domestic stability, economic growth, and investor confidence.”

The second major issue for the economy is the shekel’s strength, which is hampering domestic growth. The Bank of Israel has done a yeoman’s job in keeping the shekel’s value stable versus the dollar and euro, but S&P believes that effort is running out of gas. “We no longer view the shekel as a free-floating currency and we expect the Bank of Israel to become increasingly interventionist,” the statement said.

This is going to be necessary because it has become clear that the BOI’s policy until now “has failed to stem rapid price appreciation in the housing sector, but they do appear to have contained systemic risks.”

Overall, though, things are definitely looking up for the Israeli economy, according to S&P. “The stable outlook reflects our opinion that consensus within the Israeli government to consolidate the public finances will continue to anchor fiscal planning and reduce government debt,” said the agency. “We also expect the impact of security risks on the Israeli economy to remain contained.”

Read more: S&P: Israel now a 'high-income' country | The Times of Israel

2013 News


August 15, 2013

Moody's, the International Credit Rating Agency re-affirmed the Credit Rating of the State of Israel at A1 with a Stable Outlook

Israel Ministry of Finance

Economics and State Revenue Department

The Minister of Finance, Yair Lapid: "This is a vote of confidence by the credit rating agency in the economic plan and the new budget. In Particular, Moody's specified the return to fiscal discipline and the integration of new population groups in the labor market as constructive steps that contribute to the strength of the Israeli economy."

Moody’s, the international credit rating agency, announced on August 15 that it had re-affirmed Israel's credit rating, leaving it at a level of A1 with a stable outlook. The release of the rating announcement followed the annual visit of the company’s representatives to Israel last month, during which they met with the Minister of Finance, representatives from the Bank of Israel and other officials from the public and business sectors. This is the first rating announcement since Moody’s raised the country’s rating to A1 in April 2008.

The Minister of Finance, Yair Lapid, said: "This is an additional confirmation by the rating agency of Israel's robust and dynamic economy, which allows it to grow despite the decline in global demand and in the face of external security threats."

In their announcement, Moody's representatives noted that Israel's credit rating, A1 with a stable outlook, stems from the economic strength and financial stability which characterize the Israeli economy and from the country’s strong external position. In addition, the rating ratification stems from the persistent decline in the public debt to GDP ratio which is in complete contrast to the trend in many other developed countries. However, the improvement has slowed considerably since the beginning of the global financial crisis and Moody's noted that they had witnessed repetitive amendments of government deficit targets in an upward direction. The agency favorably noted the deep and liquid funding sources of the government, both in the domestic and the global markets.

According to Moody’s, the key challenges facing the Israeli economy are the geo-political risks, especially the Iranian threat and demographic trends which, in the medium to long term, indicate a growth in the population groups that are characterized by low participation in the labor force. In this context, Moody's analysts favorably noted the renewal of negotiations with the Palestinians, IDF conscription reforms and welfare grants encouraging vulnerable populations to join the workforce. In addition, the rating agency noted the hi-tech sector and the production of natural gas that began in 2013 as strong and sustainable growth engines in the Israeli economy.

The report placed special emphasis on retaining fiscal discipline and the importance of adhering to the deficit goals the government had set for itself as well as the ongoing commitment to continue to reduce the debt – GDP ratio.

In its announcement, Moody's notes that a major improvement in the geopolitical situation and an ongoing significant reduction in the public debt to GDP ratio may lead to a rating upgrade, whereas deterioration in the geopolitical situation and the cessation of the trend of lowering the debt to GDP ratio could negatively affect the country’s rating.

The Accountant General, Mrs. Michal Abadi-Boiangiu, said: "As noted in the report, the downward trend in recent years of the debt-GDP ratio and the responsible and professional debt management policy implemented by Debt Management Unit at the Accountant General's Finance Division, are necessary in order to maintain the State of Israel’s high credit rating".

2012 News

October 9, 2012

IMF offers positive forecast for Israel

Alongside bleak assessment of world economy, international lending organization predicts Jewish state's inflation rate will remain under control, budget deficit on its way down.

The Associated Press contributed to this report

The International Monetary Fund on Saturday released a particularly bleak assessment of the world economy, alongside positive estimates in regards to the Israeli economy.

The forecast was delivered in Tokyo at the Annual Meetings of the IMF and the World Bank Group, attended by finance ministers and central bank governors from 200 countries.

The IMF and World Bank were established after World War II as multi-national institutions to coordinate economic policy, encourage development and prevent crises.

Israel is being represented at this year's talks by Bank of Israel Governor Stanley Fischer.

According to the forecast, the world economy – plagued by uncertainty and fresh setbacks – has weakened further and will grow more slowly over the next year.

Advanced economies are risking recession, the international lending organization said in a quarterly update of its World Economic Outlook, and the malaise is spreading to more dynamic emerging economies such as China.

The IMF predicts that the world economy will expand 3.3% this year, down from the estimate of 3.5% growth it issued in July. Its forecast for growth in 2013 is 3.6%, down from 3.9% three months ago and 4.1% in April.

Underpinning that bleaker scenario are the assumptions that Europe will continue to ease monetary policy and that the US will avert a crushing blow to growth by fending off a so-called "fiscal cliff" that could result from a failure to reach a compromise on its budget law and tax cuts.

Conditions could worsen if the United States doesn't deal with its budget crisis soon, the IMF said.

"Downside risks have increased and are considerable," the fund said. It said its forecasts are based "on critical policy action in the euro area and the United States, and it is very difficult to estimate the probability that this action will materialize."

Improvement in Israel

A completely different picture was presented by IMF economists in regards to Israel. According to the forecast, the Israeli economy is expected to expand 2.9% this year and 3.2% next year – a faster growth rate than most developed Western countries (Israel's growth rate totaled 4.7% in 2011).

The annual inflation rate is expected to remain low, at around 2%, and the unemployment rate will remain 7%.

The government's budget deficit, according to the IMF forecast, will stand at 3.5% of GDP and will drop to 3.3% next year. Moreover, the Israeli government's budget deficit is expected to fall to 2.5% of GDP in 2015.

September 30, 2012

Israel's credit rating has been reaffirmed at A+ by Standard and Poor’s

Standard & Poor logo

Israel's credit rating has been reaffirmed at A+ by "Standard and Poor,” at a time when S&P lowers the credit rating of an increasing number of Western countries. According to S&P, "the Israeli economy continues to generate solid economic growth and enjoy a net external asset position, even though the current account has temporarily turned negative. The stable outlook reflects our view that there is sufficient political will to prevent a sizable increase in the government's debt burden, and that major security risks will be contained." S&P noted that "there has been fiscal slippage on account of lower government revenues," but added, "recent austerity measures and current growth levels should ensure that debt ratios modestly improve in the medium term.” Referring to the most important economic development in Israel in recent times, the discovery of large offshore gas reserves, S&P said, "We forecast that by the middle of the decade domestic natural gas production should contribute to improved external and fiscal balances.

(Globes Business Daily, September 30, 2012)

August 28, 2012

Israel Bonds: A strategic asset for the country

For Israel to have the support of Israel Bonds – a dedicated, independent financial pipeline – is without a doubt an invaluable and strategic national resource. Read more

July 26–August 2, 2012

Of Deficits and Debts

Israel also has a source of finance and a borrowing instrument unique to it – although quite a few countries would dearly love to have something similar. This source is Diaspora Jewry, and the instrument which Israel uses to borrow from Jews around the world is Israel Bonds. Read more

2011 News

September 9, 2011

S&P Upgraded Israel's Credit Rating to A+

The rating action reflects S&P view of Israel's improved economic policy flexibility as a result of strong growth and careful macroeconomic management

Standard & Poor logo

Description: & Poor's Ratings Services (S&P) raised its long-term foreign currency sovereign credit ratings on the State of Israel to 'A+/A-1' from 'A/A-1'. At the same time, S&P affirmed the local currency ratings at 'AA-/A-1+'. Also, S&P's outlook is stable, and the transfer and convertibility (T&C) assessment remains at 'AA'.

Notes by Standard & Poor's on Israel's rating upgrade

S&P mentioned that their ratings on Israel are supported by their view of its "prosperous and resilient economy, strong institutions, ongoing fiscal consolidation, and robust external performance." The ratings are also constrained by significant geopolitical risks, partially offset by U.S. support, and its still-sizeable public-sector debt burden.

According to S&P, Israel is on a credible path toward continued government debt burden reduction and stronger external indicators, having weathered the global financial crisis well. S&P also noted that Israel's external position is sound, as a result of consistent current account surpluses since 2003, and that that the production of natural gas by the middle of the decade is likely to further increase the economy's efficiency as well as strengthen its fiscal and external positions.

The stable outlook reflects S&P's opinion that Israel's popular consensus about containing public debt will remain intact despite social protests. S&P noted that "despite rapid appreciation in housing prices, we do not consider the sovereign to be exposed to significant contingent liabilities from the financial system.

Also, according to S&P, the banking sector appears to be tightly regulated, resident banks seem to pursue relatively conservative business models, and Israeli banks and households are also fairly well capitalized by international standards.

Israel's credit ratings:

S&P first upgraded Israel's credit rating to 'A' in 2007. In January 2009, it reaffirmed its decision, further giving Israel's market a "solid" forecast. Alongside the decision by S&P to upgrade Israel's credit rating to A+ this September, the two other major credit rating firms, Moody's and Fitch, also reaffirmed their rating towards Israel, as Moody's left Israel's A1-Stable rating unchanged, and Fitch ratings left Israel's A Stable rating unchanged.

Israel's credit ratings

Notes by Ministry of Finance officials

Minister of Finance, Dr. Yuval Steinitz, noted that "this is an impressive credit given to the Israeli economy and its successful coping with the global economic crisis. This achievement of credit upgrade is especially unique given the debt and massive unemployment crisis, which hurt many economies' credit rating." Minister Steinitz also noted that "the fact that S&P mentioned the latest natural gas findings as a point of strength for the Israeli economy indicated the importance of the work done by the Committee to Examine the Fiscal Policy on Oil and Gas Resources in Israel, Headed by Prof. Eytan Sheshinski." The minister added that "Israel cannot rest on its laurels, as the on-going global crisis demands us to keep our budget frameworks and economic policies.

The Accountant General in the Ministry of Finance, Ms. Michal Abadi-Boiangiu, noted that "the announcement by S&P in such times, when the world is confronting a deep global economic crisis, testifies on the strength of the Israeli economy and reinforces the importance of reducing Israel's public debt.


August 8, 2011

Agencies Reaffirm Investment Grade Ratings

On August 8, 2011, Standard & Poor’s reiterated its A/A-1 sovereign credit rating for Israel with an outlook of “stable.”

Earlier this year, Moody’s and Fitch also reconfirmed ratings of “stable,” with Moody’s citing Israel’s “resilient and dynamic economy.”

In other positive economic news, Israel’s first quarter GDP growth reached 4.6 percent, prompting observers to upwardly revise their annual expectations. In addition, private consumption and gross fixed investment both increased in the first quarter of 2011, by 9.0 percent and 26.1 percent respectively. Israel’s Finance Ministry noted that “these numbers reflect the growing levels of optimism and consumer confidence in Israel’s economy.”

2009 News

December 10, 2009

Israel’s economy ready to roar: Analysts: "Radical" monetary loosening helped limit the recession's effects.

Israel's economy is "ready to roar", according to Barclays Capital analysts Daniel Hewitt, Koon Chow, and Arko Sen. Finding that Israel passed through the global recession with only light damage, the analysts say the economy is ready to resume growing.

The analysts see three main reasons why Israel made it through the recession better than other economies. Israel's financial sector was not as vulnerable, "radical" monetary loosening by the Bank of Israel limited a decline in domestic demand, and that decline was also offset by improvements in net exports.

Barclays expects Israel's real GDP to grow 2.9 percent in 2010 and by 3.1 percent in 2011, with gross public debt falling to 76 percent of GDP in 2010, and 74.3 percent of GDP in 2011.

Barclays predicts that the shekel-dollar rate will fall to NIS 3.50/$ by the end of 2010, and will fall even further to NIS 3.40/$ by the end of 2011.

Barclays seems impressed with the Bank of Israel's handling of monetary policy during the recession. "Monetary policy was put on emergency loosening rates lowered to 0.5 percent and M1 money growth exceeding 60 percent. While this is similar to monetary policies in the G-3 countries among others, there are large differences. Inflation never dropped as much in Israel and growth declines were mild. Israel has had negative real interest rates since 2008. Thus, Israeli monetary policy has been pre-emptive rather than reactive. It is possible, even likely in our opinion, that if the Bank of Israel had not loosened monetary policy this much, the recession in Israel would have been deeper and could have experienced deflation (perhaps like Chile, Czech, Cyprus, and Malaysia). The Bank of Israel seems to have succeeded in counter-cyclical monetary policy."

The analysts note that Israel's fiscal policy played a smaller role in combating the effects of the recession, with what the analysts call a modest spending stimulus. However, the analysts do note Israel's falling government debt, and say that the current government is committed to responsible public finances and lowering public debt. "The public debt level is currently 77 percent of GDP, down from over 100 percent several years ago and Israel has benefited from an improved expenditure structure (for instance, military spending has decreased as a share of GDP). This cut in spending provides more room for private sector expansion. Still, spending pressures do exist, and there is some risk that expenditures will increase to take up the slack created by rising tax revenues."

The analysts warn that as a consequence of the "radical monetary policy" there is a higher inflation risk, but that the Bank of Israel appears committed to a process of gradual interest rate hikes which it says will bring rates to 3 percent by the end of 2010. They note that the shekel's appreciation should help to lower inflation.

November 8, 2009

Fitch maintains Israel's credit rating

Fitch: Israel is one of only four A-rated countries that will emerge from the recession in 2009.

Fitch Ratings are reiterated Israel's sovereign debt rating at A, with a "Stable" outlook. The rating is for Israel's long-term foreign currency issuer default rating. Israel's domestic bond rating was maintained at A+, also with a "Stable" outlook. Fitch follows Moody's Investors Service and S&P, both of which recently reiterated their credit ratings for Israel.

Fitch said that Israel is one of only four A-rated countries that will emerge from the recession in 2009. It said that the Israeli economy survived the global economic crisis in better shape than many similar economies. Israel's recession was easier than in similar European and Asian countries, and it was most felt in lower tax revenues.

Fitch partly attributed Israel's good performance to the Bank of Israel's aggressive monetary policy, including its exchange rate policy and increasing its foreign currency reserves. Additional factors were a stable, problem-free banking system, and the lack of bubbles in the domestic market. Israel's high-tech and services industries demonstrated stability in the face of falling global demand caused by the economic crisis, and those industries' exports led to an unprecedented current accounts surplus in 2009.

Fitch warned that Israel's high debt-to-GDP ratio was still the main factor limiting the country's sovereign rating, but said that fiscal anchors, such as the spending cap and deficit target, had slashed the ratio from 100% at the end of 2003 to 78% at the end of 2008. While still high, there are countries with a higher debt-to-GDP ratio.

October 2009

Israel Thrives During Economic Meltdown

By Dan Senor and Sol Singer

Israel has thrived during the global collapse—thanks to an entrepreneurial culture built on compulsory military service. Dan Senor and Saul Singer on why U.S. companies should take notes.

For all the press coverage of the Middle East, there is one side of Israel that gets scant attention: the country’s economy has the highest concentration of innovation and entrepreneurialism in the world today. For years, multinational technology companies and global investors have been beating a path to Israel. Even in 2008—a year of global economic turmoil—per capita venture investments in Israel were 2.5 times greater than in the United States, more than 30 times greater than in Europe, 80 times greater than in China, and 350 times greater than in India. And Israel still boasts the highest density of start-ups in the world (a total of 3,850 start-ups, one for every 1,844 Israelis). More Israeli companies are on NASDAQ than companies from all of Europe, China, India, Korea, and Japan combined.

The root of Israel’s economic dynamism—and the way it weathered a global downturn—can be traced to government policies that cultivate a unique entrepreneurialism. These include innovative immigration policies and disproportionate research and development spending (Israel is the world leader in the percentage of the economy that is spent on R&D). But the real turbocharger has been its universal military training and national service program.

Here's how it works. While students in other countries are preoccupied with deciding which college to attend, Israelis are weighing the merits of different military units. And just as students elsewhere are thinking about what they need to do to get into the best schools, many Israelis are positioning themselves to be recruited by the elite units of the IDF (Israel Defense Forces).

One IDF Army officer with whom we spoke knew when he was just twelve years old that he wanted to learn Arabic, partly because he realized even then that it might help him get accepted into the best intelligence units.

One year before reaching draft age, all seventeen-year-old males and females are called to report to IDF recruiting centers for an initial one-day screening that includes aptitude and psychological exams, interviews, and a medical evaluation. At the end of the day, a health and psychometric classification is determined and service possibilities are presented to the young candidate in a personal interview.

Those who complete the training together remain as a team throughout their regular and reserve service. Their unit becomes a second family. They remain in the reserves until they are in their mid-forties.

While it’s difficult to get into the top Israeli universities, the nation’s equivalent of Harvard, Princeton, and Yale are the IDF’s elite units. The unit in which an applicant served tells prospective employers what kind of selection process he or she navigated, and what skills and relevant experience he or she may already possess.

“In Israel, one’s academic past is somehow less important than the military past. One of the questions asked in every job interview is, Where did you serve in the army?” says Gil Kerbs, an intelligence unit alumnus who today works in Israel’s venture capital industry, specializing in China’s technology market. The advantage that Israel’s economy and its society gains from this equally dispersed national service experience was driven home to us by neither an Israeli nor an American—but rather by Gary Shainberg, an eighteen-year veteran of the British navy. Today, he is vice president for technology and innovation at British Telecom.

“There is something about the DNA of Israeli innovation that is unexplainable,” Shainberg said. But he did have the beginnings of a theory.

“I think it comes down to maturity. That’s because nowhere else in the world where people work in a center of technology innovation do they also have to do national service.”

At the age of 18, Israelis go into the army for a minimum of two to three years. If they don’t reenlist, they typically enroll at a university.

“There’s a massive percentage of Israelis who go to university out of the army compared to anywhere else in the world,” said Shainberg.

In fact, according to the Organisation for Economic Co-operation and Development (OECD), 45 percent of Israelis are university-educated, which is among the highest percentages in the world. And according to a recent IMD World Competitiveness Yearbook, Israel was ranked second among sixty developed nations on the criterion of whether “university education meets the needs of a competitive economy.”

By the time students finish college, they’re in their mid-twenties; some already have graduate degrees, and a large number are married. “All this changes the mental ability of the individual,” Shainberg reasoned. “They’re much more mature; they’ve got more life experience. Innovation is all about finding ideas.”

Innovation often depends on having a different perspective. Perspective comes from experience. Real experience also typically comes with age or maturity. But in Israel, you get experience, perspective, and maturity at a younger age, because the society jams so many transformative experiences into Israelis when they’re barely out of high school. By the time they get to college, their heads are in a different place than those of their American counterparts.

“You’ve got a whole different perspective on life. I think it’s that later education, the younger marriage, the military experience—and I spent eighteen years in the [British] navy, so I can sort of empathize with that sort of thing,” Shainberg went on. “In the military, you’re in an environment where you have to think on your feet. You have to make life-and-death decisions. You learn about discipline. You learn about training your mind to do things, especially if you’re frontline or you’re doing something operational. And that can only be good and useful in the business world.”

This maturity is especially powerful when mixed with an almost childish impatience.

Since their country’s founding, Israelis have been keenly aware that the future—both near and distant—is always in question. Every moment has strategic importance. As Mark Gerson, an American entrepreneur who has invested in several Israeli start-ups, described it, “When an Israeli man wants to date a woman, he asks her out that night. When an Israeli entrepreneur has a business idea, he will start it that week. The notion that one should accumulate credentials before launching a venture simply does not exist. This is actually good in business. Too much time can only teach you what can go wrong, not what could be transformative.”

The IDF also offers recruits another valuable experience: a unique space within Israeli society where young men and women work closely and intensely with peers from different cultural, socioeconomic, and religious backgrounds. A young Jew from Russia, another from Ethiopia, a secular sabra (native-born Israeli) from a swanky Tel Aviv suburb, a yeshiva student from Jerusalem, and a kibbutznik from a farming family might all meet in the same unit. They’ll spend two to three years serving together full-time, and then spend another twenty-plus years of annual service in the reserves.

The IDF was structured to rely heavily on reserve forces, since there is no way for such a small country to maintain a sufficiently large standing army. So for combat soldiers, connections made in the army are constantly renewed through decades of reserve duty. For a few weeks a year, or sometimes just a week at a time, Israelis depart from their professional and personal lives to train with their military unit. Not surprisingly, many business connections are made during the long hours of operations, guard duty, and training.

While a majority of Israeli entrepreneurs were profoundly influenced by their stint in the IDF, a military background is hardly common in Silicon Valley or widespread in the senior echelons of corporate America.

As Israeli entrepreneur Jon Medved—who has sold several start-ups to large American companies—told us, “When it comes to U.S. military résumés, Silicon Valley is illiterate. It’s a shame. What a waste of the kick-ass leadership talent coming out of Iraq and Afghanistan. The American business world doesn’t quite know what to do with them.”

In Israel it is the opposite. While Israeli businesses still look for private-sector experience, military service provides the critical standardized metric for employers—all of whom know what it means to be an officer or to have served in an elite unit.

Dan Senor, a professional investor, is an adjunct senior fellow at the Council on Foreign Relations and author of Start-up Nation: The Story of Israel's Economic Miracle. From 2003-2004, he was based in Baghdad as a senior adviser to the U.S.-led Coalition in Iraq.

Saul Singer is a columnist for the Jerusalem Post, where he also served for six years as editorial page editor.

June/July 2009

Moody's, S&P, Reaffirm Israel's Rating

Moody's reaffirmed Israel's A1 rating after their annual trip to Israel this past June, 2009.

In addition, Standard & Poor's also re-affirmed their A rating for Israel following their visit this past July, 2009.

Fitch also made their annual visit this past July and should release their rating update soon.

Israel's rating reaffirmation in the midst of a global financial crisis where many countries are being downgraded shows the strength and stability of the Israeli economy.

(Source: Ministry of Finance – Debt Management Unit, Accountant General).

2008 News

April 21, 2008

'Moody's' upgrades Israel's credit rating to A1

International credit ratings firm Moody's upgraded Israel's foreign and local currency bond ratings and foreign currency ceiling for bank deposits to A1 from A2.

The upgrade reflects Israel's proven resiliency in the face of repeated economic and political shocks and the ongoing financial and political support from the United States and the Jewish Diaspora, said Moody's.

Finance Minister Ronnie Bar-On said in response that "particularly in these times of instability and an international credit crisis, Israel's economy is being recognized for its fortitude and stability."

"Fiscal reforms are paying off in terms of increased economic vibrancy, diversification and competitiveness, and to the benefit of strengthening tax revenues, in spite of tax cuts. These factors have led Israel to post consistent current account surpluses, helping to insulate the economy in the current adverse global conditions," said Joan Feldbaum-Vidra, an analyst at Moody's.

March 2008

Moody's places Israel's ratings on review for possible upgrade

About 70% of the government's external debt is sourced from US loan guarantees or State of Israel Bonds at favorable costs of funding.

State of Israel Bonds are sold mainly to Jewish communities outside of Israel, a group with deep and ready pockets to finance the Jewish state, especially during times of domestic or regional conflict. ‘These ample sources of liquidity are key credit strengths underlying Israel's high credit rating,’ said Lindow.”


Moody's has placed Israel's A2 government bond ratings and the A2 country ceiling for foreign currency bank deposits on review for possible upgrade. The ratings have carried a positive outlook since May 2006. All other sovereign ratings are affirmed, including the Aa1 country ceiling for foreign currency debt.

The review for upgrade reflects both the resilience of the Israeli economy in response to repeated economic and political shocks and the fiscal consolidation of the past several years. Underlying the country's rating is a history of financial and political support from the United States and the Jewish diaspora.

Moody's review will primarily focus on the continued ability of the government to stay the course on debt reduction notwithstanding a fractious domestic and regional political environment and the ever-more challenging global credit climate.

"Its ability to absorb economic and political shocks without fundamentally subverting its prudent fiscal strategy nor undermining its economic vibrancy distinguishes Israel favorably relative to an emerging market," according to Kristin Lindow, Moody's lead sovereign analyst for Israel.

Lindow observed that Israel's high per capita income, its competitive high-tech and industrial sectors, and strong government effectiveness are more akin to an advanced developed country. Moody's believes that advanced economies with strong institutional foundations and deep capital markets can better manage relatively large levels of government debt and are generally less volatile in terms of economic performance and policy.

But Lindow stressed that Israel's policy track record itself tells a compelling story about the country's ability to withstand shocks and its payment capacity. Aside from a large government debt, explicit credit challenges include a low labor force participation rate and persistently high inflation.

"Until a little more than a decade ago, indexation sustained stubbornly high inflation that substantially raised the servicing costs of the government's large domestic debt," said Lindow. "A successful disinflation program, reinforced by a robust monetary policy framework and, more recently, fiscal orthodoxy has significantly reduced the debt and debt servicing burdens. Other structural reforms have brought down unemployment while raising labor participation."

Fiscal discipline has been sustained in the face of economic and political pressures, said Lindow, including heightened military spending during and after the Second Lebanon War in 2006. She said that this track record underscores Israel's strong commitment to lowering the large public debt.

In contrast to the large, expensive domestic debt, Moody's said that Israel's external debt and debt service is very manageable. About 70% of the government's external debt is sourced from US loan guarantees or State of Israel Bonds at favorable costs of funding. State of Israel Bonds are sold mainly to Jewish communities outside of Israel, a group with deep and ready pockets to finance the Jewish state, especially during times of domestic or regional conflict. "These ample sources of liquidity are key credit strengths underlying Israel's high credit rating," said Lindow.

Lindow pointed to Israel's precarious security environment and the very poor outlook for the resumption of a peace process with the Palestinians as another critical credit challenge.

"Ongoing regional and domestic conflict continues to complicate policymaking, contributes to outsized budgetary defense expenditures and also is an obstacle to increased investment and stronger growth," cautioned Moody's. "These factors are likely to constrain Israel's rating from reaching substantially higher rating levels."

Lindow said that in spite of the substantial economic costs extracted by the political conflicts, Israel's high-tech sector is boosting GDP growth and government revenues. Though below potential, Israel's economic growth has been steady and quite strong.

"Although Israel is not a commodity-producing country, it has posted consistent current account surpluses in recent years, and the country is already a large net external creditor," said Lindow. "These are key ingredients that help to insulate Israel's external sector from adverse global financial conditions."

Feb 2008

Fitch raises local rating

Details from here

2007 News

Dec 2007

Standard & Poor's raises local rating

Standard & Poor's, the international credit rating agency raised its credit ratings for most Israeli foreign and domestic debt for the first time since 1995, on the back of four years of "robust'' economic growth and a shrinking state budget deficit.

"We expected this, but the timing was a bit of a surprise because we thought it would come after the 2008 budget vote at the end of December," said Michael Sarel, chief of economics at Harel Insurance & Finance Ltd. "It appears that the fiscal situation is so good that even if there are last-minute changes in the budget it won't make any difference."

Israel's long-term foreign currency rating was raised to A from A- and its long-term local-currency rating to AA- from A+. Israel's short-term domestic rating was boosted to A-1+ from A-1.

The upgrade was the first for Israel since 1995, when it was raised to A- from BBB+ as the government issued bonds for the first time ever overseas. Last February, S&P raised the outlook for Israel to "positive'' from "stable.'' S&P estimated for Israeli gross domestic product to grow 5.4 percent this year because of "strong'' exports and "dynamic'' consumer spending.

"Such a quick rebound after the conflict in Lebanon in August 2006 demonstrates the economy's ability to withstand severe shocks," said S&P credit analyst Veronique Paillat-Chayrigues.

Prime Minister Ehud Olmert said that the upgrade was an "expression of confidence'' in the Israeli economy and the government's economic policy. Israel's economy has been growing since the middle of 2003, except for a retreat in third-quarter of 2006 during the Second War in the Lebanon. S&P forecasted that Israel's economy will probably grow a "relatively healthy'' 3.5% to 4% next year because the country's technology industry should be able to weather the impact of a slowdown in global trade. Furthermore, the government's budget deficit will probably narrow to 0.6% of GDP this year, compared with a budgeted 2.9%. Government debt will equal 82% of GDP by the end of this year, down from 103% in 2003.

May 2007

Israel to Join OECD

(Communicated by the Prime Minister's Media Adviser)

The Organization for Economic Cooperation and Development Ministerial Council Meeting in Paris on April 16, 2007, and approved a decision to open accession discussions with Israel.

This decision is the fruit of a complicated and comprehensive working process that was carried out over several years by the Prime Minister's Office, the Bank of Israel and the Finance, Foreign, Justice and Industry, Trade and Employment ministries. The decision attests to respect for the Israeli economy and constitutes international recognition of the State of Israel's achievements as a democratic and developing country, and of its ability to contribute both to the global economy and to the organization. The decision to invite Israel to begin the process of joining the OECD is an important diplomatic achievement.

Prime Minister Ehud Olmert, who accelerated the aforesaid process during his tenure as Industry, Trade and Employment Minister, praised the decision: "This is a step that expresses confidence in the Israeli economy, in its strength and in its ability to develop. The great jump that the Israeli economy has made in recent years will receive significant encouragement. There is no doubt that the country will be able to enjoy additional investments from all over the world. My Government, which has set as a goal the improvement of residents' quality of life and the reduction of gaps through increased growth, can now be proud that the process of entering the OECD has begun and that we are on the road to additional growth. I will see to it that all relevant Government ministries and bodies will make every effort so that the timetable for entering the OECD is as short as possible."

The membership process is expected to take one to one-and-a-half years. It will be necessary to pass legislation, enact reforms and meet the organization's standards. After the membership process is completed, Israel will be able to benefit from assistance in encouraging investments, the upgrading of the economy's credit rating, improvements in competitiveness, etc.

April 2007

Moody’s says Israeli economy in prolonged upturn

Moody's Investors Service says in its annual report on Israel that the country’s investment-grade ratings and positive outlook reflect the country's improved economic dynamism and unusual resilience despite war and ongoing regional tensions. Moody’s rates Israel's foreign currency country ceiling for bonds as Aa1, based on the foreign currency government bond rating of A2, and its assessment of a very low risk of a payments moratorium in the event of a government bond default.

Moody's Vice President Kristin Lindow said, "The Israeli economy is in the midst of a prolonged upturn that was only briefly affected by last year's war with Hizbullah, the militant Islamic movement based in Lebanon. Growth has averaged 5% for the last three years, yet the current account surplus actually widened further each year and inflation was nonexistent in 2006."

January, 2007

Fitch Upgrades Israel 2007 Outlook to Positive

Fitch Ratings improved Israel 's foreign and local currency Issuer Default ratings (IDR) to Positive from Stable. Richard Fox, Head of Middle East and Africa Sovereign Ratings at Fitch stated, "The Positive Outlook reflects the Israeli economy's increased dynamism and resilience following the reforms of recent years, demonstrated by the limited economic impact of the war in Lebanon and strong rebound now underway.

External solvency indicators have continued to improve and strong inward and outward investment reflect Israel’s growing integration with the world economy. "

2006 News


Sept 26, 2006

War Time Economy Stable


The governor of the Bank of Israel, Stanley Fischer, stated today at a debate of the Knesset Finance Committee that the economic situation during the recent war in Lebanon was comparatively stable. “Israelis had faith in the economy, and they did not transfer their investments abroad in any unusual manner. Foreign investors did not pull out in high numbers either as compared to investments before the war,” stated the governor.

Fischer added that the stock exchange registered less of a rise or fall in comparison to stock markets around the world. The most negative result was the return on 10-year bonds, which rose by 0.2 percent, when the rest of the world registered a descent. The governor stated that this showed the risk premium that we have needed to pay.

Fischer stated that the conflict mostly affected industry, tourism, and services. He estimated that the loss in production was between 0.8-1 percent, and the war would have a long-time effect on foreign tourism.

September 3, 2006

Investing in Israel

By Ron Dermer

“Smart investors see beyond the sound and fury of the moment and focus on fundamentals that pay huge dividends over time. As the Jewish state emerges from this latest round of violence, and as security is once again restored, Israel's economic motor will steam ahead. The smart money is getting on board now.”

Before Hizbullah terrorists brazenly crossed an internationally recognized border, killed several Israeli soldiers, kidnapped two others, and fired a flurry of missiles into northern Israel, the Israeli economy was steaming ahead. In the first half of the year, it was enjoying 6% growth, low inflation, falling unemployment, a budget surplus, a balance of payments surplus, a shrinking national debt, and record levels of foreign investment - an economic picture that was accurately described by one international analyst as "nearly perfect."

Though five weeks of war struck a blow to Israel's economy, it is strong enough to absorb it. Indeed, Israel's economy remains strong, and it will only get stronger in the future.

Recognizing this, none of the major ratings agencies lowered Israel's credit rating during the war. Those who have been paying attention to the recent transformation of the Israeli economy understand why.

First, Israel's fiscal policies are sound. Three years ago, finance minister Binyamin Netanyahu put Israel's fiscal house in order, and his successors have maintained that order. Faced with a deep recession, a bloated public sector (55% of GDP), exploding deficits (6% of GDP), a high debt burden (106% of GDP) and sky-high tax rates (64% marginal rate), the government drastically cut the budget and sharply reduced taxes. Moreover, abiding by conditions set forth in a 9 billion dollar loan guarantee program with America, Israel capped spending growth at 1% per year, and has maintained that budgetary framework for the last three years.

The results have been dramatic. While still high, the public sector now accounts for less than one-half of GDP, tax revenues have skyrocketed, and debt ratios have dropped to under 90% of GDP, bringing them close to the ratios maintained by the leading industrialized nations.

Second, a number of important structural reforms were implemented in the last three years. The government sold off its stake in the country's second and third largest banks, and privatized a number of state-owned companies including EL AL, the national airline, and Bezek, the national phone company. In addition, Israel overhauled the government pension system, restructured the ports, modernized the country's rail and road systems, and, perhaps most important, reformed the country's capital market, forcing what was effectively a banking duopoly to sell off its exclusive control of most of the country's financial assets.

The new government, led by Prime Minister Ehud Olmert, and Finance Minister Avraham Hirschson, has said that it is committed to continuing these prudent fiscal policies and to pressing forward with reform. Just three weeks ago, in the middle of the war, the government sold one of Israel's two oil refineries for $800 million, a sum nearly triple what it had been expected to fetch.

Sound fiscal policy is buttressed by sound monetary policy. Now that Alan Greenspan has retired, Israel can justifiably boast of having the finest central banker in the world in Stanley Fisher. With investors confident in his steady hand navigating Israel's economic ship, both the Israeli stock market and the shekel have essentially maintained their pre-war values.

But beyond the personalities or the policies of its government lies the real key to Israel's future - its people. With more scientists, engineers, high-tech start ups, and research & development spending per capita than any country in the world, Israel will continue to provide investors with access to human capital that is second to none.

That is why companies like Hewlett Packard and Sandisk acquired Israeli firms and technology in billion dollar deals after the war had already started, and why Greylock Partners just launched a $150 million venture capital fund to invest in early stage Israeli technology. That is also why it was no surprise when Intel announced last month that its Israeli R&D facility in Haifa developed a new chip that will form the core of the company's new mobile and desktop production line, and why Warren Buffet said that the war would not have dissuaded him from his recent purchase of a four billion dollar stake in Iscar, an international metal works company based in northern Israel.

To be sure, in addition to the scores who have lost their lives and the hundreds who have been injured, the war has caused significant economic damage. With missiles raining down on Israel's northern cities, the thousands of companies located there were either closed or forced to operate at only a fraction of their capacity. Tourism in the country as a whole, and in the north in particular has been hit hard, and will surely take many months to recover.

But tourism represents less than 2% of Israel's GDP. The heart of Israel's economy remains the export of high-technology goods and services and its pulse remains the highly skilled, dynamic, and entrepreneurial workforce that creates those goods and services.

July 25, 2006

Fitch, S&P, D&B Affirm Israel’s Ratings

On July 25, Standard & Poor’s affirmed Israel’s long-term foreign and local currency credit ratings at ‘A-’ and ‘A+’ respectively, and its short-term foreign and local currency ratings at 'A-1'. The company also maintained Israel’s stable outlook, stating, “The ratings reflect the improved resilience of Israel’s public finances and economy to geopolitical shocks, after a three-year period of fiscal consolidation and strong economic growth.”

A news announcement released by Fitch on July 14 noted, “Although confidence in Israel will take a short-term knock from the recent escalation of violence, the economy starts from a buoyant position which, together with a robust policy framework, will help limit economic fallout.” Fitch is maintaining its foreign and local currency ratings at ‘A-’ and ‘A’ with a stable outlook.

May 24, 2006

Israel an emerging 'safe haven,' Deutsche Bank says

As emerging markets experience their steepest slide in eight years, investment bank Deutsche Bank this week singled out Israel as one of two "safe havens" for investors looking to put their money in developing countries' exchanges.

"For those with very strong risk aversion, the low beta markets with little commodity exposure are Israel and Malaysia. They are your safe haven," Kingsmill Bond, emerging markets strategist at Deutsche Bank said in a research report.

Bond told The Jerusalem Post it was an accepted fact that Israel was a low volatility market compared to other emerging markets due to it not being subject to currency, commodity or interest rate spread concerns.

"Essentially Israel has a much more developed market type of environment," he said.

Emerging markets have lost 14 percent since their peak two weeks ago with Turkey, Argentina, South Africa and Russia listed by Bond as the worst performers for the period.

The Morgan Stanley Capital International Emerging Markets Index, which tracks shares in 26 developing countries globally, rose 2.3% to 767.15 during afternoon trade in London on Tuesday, on track to break the longest losing streak the index has had in eight years. The measure had experienced 10 straight days of losses.

The sell-off in emerging markets, according to Bond, came as a result of higher than expected US inflation data combined with slightly weaker US growth numbers.

"Investors are concerned that the Fed will be obliged to tighten by more and that in turn this will damage US growth," he said. "Weaker US growth will lead to weaker commodity prices and rising spreads between emerging market bonds and US treasuries, which are the two key drivers of emerging markets."

The TA-25 index meanwhile, having edged the 900 benchmark level on May 8, has since dropped to 870 at close of trade Tuesday, slightly above the level it was at the beginning of the month.

While Bond has a rating of "underweight" for Israel, he listed it among the countries in which buying opportunities are likely to materialize, and which do not have major macroeconomic vulnerabilities. He added that the investment house was reconsidering the rating "as long as internal economic growth continued."

Earlier this week, the Finance Ministry raised its growth forecasts for the year from 4.1% to 5.3%.

May 10, 2006

Moody upgrades outlook on Israel bonds

"Israeli society and its political and economic decision-makers have shown remarkable resiliency."

May 10, 2006

Moody's Investors Service has changed the outlook on Israel's key foreign-currency ratings from "Stable" to "Positive". "Israeli society and its political and economic decision-makers have shown remarkable resiliency in meeting the numerous challenges of the last few years," the announcement from Moody's said. The outlook change to positive affects Israel's foreign-currency ceiling, its foreign-currency government bonds (not guaranteed by the U.S. government), its foreign-currency bank deposit ceiling, and its local-currency bonds (all currently rated A2). Israel's local-currency bank deposit ceiling (Aa2) and its local currency guideline (Aa1) have a stable outlook and were not affected by today's rating action. The local currency guideline is the highest possible rating that could be assigned to obligors and obligations denominated in local currency within a country.

"Israel is exhibiting considerable growth of GDP per capita (purchasing power parity basis), moving towards a level more often associated with advanced economies than with developing ones. Also, the government debt-to-GDP and debt-to-revenue ratios have been on a declining trend since 2004," Moody's said.

"Israeli institutions have proved to be extremely robust in the face of considerable external and internal shocks, including global recession, the incapacitation of Prime Minister Ariel Sharon, the reformulation of the political spectrum, and repeated terrorist threats and actions.

" When combined with the unusual sources of financial assistance afforded by various programs of the United States government and Israelis and Jews living outside Israel, the result over time may imply a diminution of credit risk.".

Moody's said it would monitor the new government's ability to continue to reduce the important government debt-to-GDP and debt-to-revenue ratios. The rating agency will also monitor the negative impact of geopolitical risk factors on the country's creditworthiness.