Fitch: Israel's strong economy, policies to limit impact of tensions

Fitch Ratings said that 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 the economic fallout.

Before the escalation of violence, Israel's economy was set to grow by more than 5% this year with the current account in surplus, foreign investment strong and inflation heading back within the 1% to 3% target band, the agency noted.

Even if the economy now slows, Israel's public debt dynamics have improved to an extent that the debt to GDP ratio will continue to fall in all but the most extreme of downside scenarios, the agency said.

Crucially for creditworthiness, the improvement in public debt dynamics, which began in 2004, has accelerated, due to continued tight spending control and buoyant revenues. Gross public debt fell below 100% of GDP last year and could approach 90% this year.

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