S&P: 'Minor' Effect on Economy From Summer War

Ratings agency Standard & Poors says that Israel's economy has not been harmed by Operation Protective Edge.

Yaakov Levi ,

Tel Aviv
Tel Aviv
Israel news photo: Flash 90

It's official: The economic effect of Operation Protective Edge on Israel's economy was “minor,” according to international ratings agency Standard & Poors. In a report Monday, the agency reiterated its high regard for Israel's economy, affirming its 'A+/A-1' rating for the country's sovereign debt, meaning that investors in Israeli bond issues and government debt are almost sure to get their money back.

The huge outlays for the summer war are not expected to affect Israel's ability to pay its debts, Standard and Poors said. The agency's forecast for Israel reflects its view “that the government will maintain stable public finances and that the impact of security risks on the Israeli economy will be contained,” the report said.

In recent comments, Defense Minister Moshe Yaalon said that the IDF’s direct costs of Operation Protective Edge amounted to over nine billion shekels. Much of that money was spent on the Iron Dome system, which “saved” Israel from conquering Gaza and allowed life to continue while avoiding major blows to the economy, Ya'alon said. “An Iron Dome interception costs 100 thousand dollars. It is worthwhile, from a financial perspective, but is still expensive.”

Not only is the Israeli government stable; the Israeli economy is as well. "In our view, the recent Gaza conflict will lead to only a modest weakening of Israel's fiscal trajectory,” the agency wrote in its report. “Although Israel may temporarily reverse its fiscal consolidation, we expect its gross general government debt ratio to remain largely flat in the next three years.”

"Although the recent fighting in Gaza is a reminder of the long-term threat posed by geopolitical risks, we consider that in the short term, the effect will only be to accentuate the economic slowdown and modestly weaken the fiscal account,” the report continued. “The fighting has not changed our view of Israel's core credit strengths, such as its prosperous and diverse economy, the contribution of natural gas production to a healthy external balance, and its relatively flexible monetary framework,” it added.