Standard & Poor's Rates Israel's Economy An A-

(July 2001)

Affirming Israel's stable economic outlook, international rating agency Standard & Poor's kept Israel's credit rating at "A-", saying the nation's economy has helped stabilize the Middle East as well as the international market.

The report, issued July 5, 2001, said Israel has made "substantial progress" in recent years in pursuing price stability and economic discipline by changing the structure of Israel's economy and making significant improvements in Israel's external position.

"These fundamental credit improvements are balancing the pressures stemming from the deterioration of the regional security situation and the downturn in world trade and international financial markets, which is slowing activity in Israel's increasingly important high tech sector," the report stated.

The ratings, double "A-minus/A-1 plus" for local currency issued credit ratings on the State of Israel and a single "A minus" for foreign currency and a double "A minus" for local currency senior unsecured debt ratings on Israel, place Israel in about the top 40 percent of the 88 nations listed in the S&P sovereign markets category.

In comments to the Jerusalem Post, Konrad Russ, S&P's sovereign ratings managing director for Europe, the Middle East and Africa, said Israel's "robust and diversified" economy has the potential of four to five percent growth once global markets recover.

Russ also warned that strained relations between Israel and the United States would take a toll on Israel's credit rating. "If the special relationship between the U.S. and Israel is harmed, thus negatively affecting Israel's geopolitical situation," Russ said, "then you will see an appropriate rating."

Sources: Jerusalem Post, (July 5, 2001); Standard & Poor's, (August 2, 2001)