(Reuters) – Israel’s election result is a positive for its credit rating because it signals “economic policy cohesion”, Moody’s Investors Service said on Monday, but the agency took no action.
“We expect the government’s fiscal rules to contain spending growth and keep credit metrics for Israel (A1 stable) on their well-established improving trend, a credit positive,” analyst Kristin Lindow wrote in a report.Moody’s had said in December that the collapse of Israel’s governing coalition was negative for its rating because it raised policy uncertainty. But after a surprise win for Prime Minister Benjamin Netanyahu’s Likud party, which took 30 of parliament’s 120 seats, Moody’s said the coalition would likely last longer than its “short-lived incongruent” predecessor. Israel’s president is meeting party heads and will then decide who will be asked to form the next government. The odds heavily favour Netanyahu, who would establish a coalition with mainly right-wing and religious parties with about 67 parliamentary seats. “Such a government would likely be inherently more stable than a coalition led by the centre-left Zionist Union, which would struggle to put together a majority,” Lindow said. Zionist Union won 24 seats in the election. Once formed, the government will need to pass a budget for 2015. Moody’s believes the deficit this year will likely be less than 2014’s of 2.9 percent of gross domestic product. It said there could be clashes between Netanyahu and the next finance minister – likely to be Moshe Kahlon, whose upstart Kulanu party won 10 seats – over how to bring down housing prices, which could include releasing more land for building.
“Nonetheless, the economy’s recovery from last year’s Gaza conflict should lead to rapid consensus over the budget allocations,” the report said, adding: “We expect the new administration will be more long-lived than the last.” (Reporting by Steven Scheer; Editing by Ruth Pitchford)]]>