Global ratings agency Moody's on Friday upgraded the Israeli government's outlook to "positive" from "stable" and affirmed its sovereign credit rating at "A1"
Moody's said the key drivers for the change in outlook included the government's reform agenda that aimed to address longer-term challenges and the agency's expectation of a further reduction in the government's debt ratio.
Israel's economy grew 8.2% in 2021, above forecasts by the country's central bank, after a 20.2% contraction in 2020. Israel's annual inflation rate hit 3.5% in February, the highest since 2011.
The Bank of Israel is expected to hike its interest rates next week, the first tightening in over a decade, to combat rising inflation from strong economic growth and the labor market.
Israeli Finance Minister Avigdor Lieberman announced earlier this week the country's budget deficit likely fell to between 1.5% and 1.6% of the gross domestic product in March, and that he intended to cut petrol taxes due to spiking fuel costs.
The agency also said Israel's affirmation of the A1 rating balances the economy's growth prospect and resilience against the government's relatively high public debt burden.
Moody's also noted that the Israeli government's debt affordability metrics were somewhat weaker than its peers.