Adios to Emerging Markets, Shalom to the Developed World
Written by: Aaron Katsman | April 18, 2008
Aaron Katsman
www.IsraelNewsletter.com
It’s official. Israel is no longer an emerging market. Yesterday, ratings agency Moody’s joined Standard & Poor’s and Fitch, by upgrading its ratings for Israel. The government foreign and local currency bond ratings have been upgraded to A1 from A2, and the foreign currency ceiling for bank deposits has been upgraded to A1 from A2 as well.
This is another feather in the cap of the Israeli economy. It was only 6 years ago that Israel was on the verge of economic collapse, but thanks to then Finance Minister and former PM Benjamin Netanyahu’s courageous economic reform policy, the economy has strengthened considerably. By lowering taxes, limiting government spending and privatizing state owned industry, Israel has experienced some of the strongest growth outside China that world has seen in some time.
The sign of a strong economy is a strong currency. Over the last year, the Israeli Shekel is one of the 3-4 strongest currencies in the world.
“Fiscal reforms are paying off in terms of increased economic vibrancy, diversification and competitiveness, and to the benefit of strengthening tax revenues, in spite of tax cuts,” said Moody’s Analyst Joan Feldbaum-Vidra.
In spite of tax-cuts? Joan, it’s because of the tax cuts. This is another proof that supply- side economics is the way to go. If you increase the economic pie, you will have larger tax revenues even with lower taxes. How do you increase the pie? By cutting taxes.
Disclosure: Author’s fund has no position in any other stock mentioned as of 4/18/08.
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Aaron Katsman is Managing Editor of the Israel Opportunity Investor newsletter. He is lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.
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