Israel’s Credit Rating Downgraded by Moody’s Amid Ongoing Conflict
Tel Aviv, Israel – February 11, 2024 – 2:38 pm
In a move criticized by the Israeli finance minister, Moody’s, the financial ratings agency, has downgraded Israel’s credit rating for the first time. The decision comes in light of the ongoing war in Gaza and the potential for conflict with Hezbollah in the north, with Moody’s warning that these events could have a negative impact on Israel’s economy.
The downgrade sees Israel’s credit rating drop from A1 to A2, with Moody’s also expressing a “negative” outlook for the country’s economy. However, it is important to note that the A2 rating continues to indicate relatively low risk, according to Moody’s.
Finance Minister Bezalel Smotrich has dismissed Moody’s decision, describing it as a “political manifesto” that fails to address the serious economic realities on the ground. In a statement from his office, Smotrich stated that the downgrade reflects a lack of confidence in Israel’s security and national strength, as well as a lack of confidence in the righteousness of its actions against its enemies.
On the other hand, Prime Minister Benjamin Netanyahu maintains that Israel’s economy remains strong and attributes the downgrade solely to the ongoing conflict. Netanyahu has vowed that once the war concludes, the country’s credit rating will improve once again.
However, there are concerns among Israeli officials that Moody’s downgrade may lead other major rating agencies to follow suit. This could further impact Israel’s economy by making it more challenging for the government to raise funds through bond sales.
Michel Strawczynski, a professor of economics at the Hebrew University in Jerusalem, explains that the length of the conflict will determine the extent of its impact on Israel’s economy. If the war persists for an extended period, the consequences may be more significant. However, if the conflict is short-lived, the impact is expected to be minimal.
It remains to be seen how Moody’s downgrade will ultimately shape Israel’s economic future. The ongoing conflict and the country’s ability to stabilize its security situation will undoubtedly be key factors in determining investor confidence and the subsequent recovery of its credit rating.
Analyst comment
Neutral news.
As an analyst, the downgrade of Israel’s credit rating by Moody’s is a concerning development due to the ongoing conflict in Gaza and potential conflict with Hezbollah. The downgrade may make it more challenging for the government to raise funds through bond sales. The length of the conflict will determine the extent of its impact on the economy, with a prolonged conflict having more significant consequences. Israel’s ability to stabilize its security situation and resolve the conflict will be crucial in determining investor confidence and the recovery of its credit rating.
