JERUSALEM, Israel - In its annual report on Israel, Moody's Investor Service determined that the Jewish state had held up well in the worldwide economic meltdown.
The report called Israel's short-term prospects "relatively good" and its A1 government bond rating "stable."
"Although the recession now appears to be over for Israel, Moody's believes a more robust recovery will have to come from global rather than domestic developments, given that Israel is a small, open economy," the report stated.
"The country's high levels of economic, institutional and financial strength" under gird its strong credit rating, and "the recession now appears to be over for Israel," the report read.
Moody's cited "the absence of the main sources of the global crisis: toxic banks assets or a real estate bubble" as crucial factors that enabled Israel to weather the global crisis.
The report concluded that resolving the Palestinian conflict would allow Israel to downsize its military spending, estimated at some $10 billion annually.
"Renewed efforts to improve Israeli-Palestinian relations would be important validation of the country's A1 government ratings," the report stated.
According to the U.S. government, Israel's 2008 military budget was 7.3 percent of its GDP (gross domestic product), placing it at one of the highest levels of military spending worldwide.
From its inception, Israel has fought five wars against hostile Arab neighbors, beginning with the 1948 War of Independence.