Israel’s Finance Minister Slams Moody’s Decision to Downgrade Credit Rating
TEL AVIV, Israel — Israel’s finance minister, Bezalel Smotrich, has voiced his criticism towards the recent decision made by Moody’s, a financial ratings agency, to downgrade Israel’s credit rating. Smotrich referred to the announcement as a “political manifesto” that lacked credible economic claims.
Moody’s made the decision to lower Israel’s credit rating for the first time, citing concerns over the ongoing war in Gaza and the possibility of a conflict with Hezbollah in the north, both of which could negatively impact the country’s economy. The agency downgraded Israel from A1 to A2, with a “negative” outlook. Despite this downgrade, Moody’s considers Israel’s rating to still carry relatively low risk.
Smotrich rejected the decision, stating that it reflects a lack of confidence in Israel’s security and national strength, as well as a lack of trust in Israel’s approach against its enemies. Prime Minister Benjamin Netanyahu, on the other hand, attributed the downgrade solely to the fact that Israel is currently at war and expressed confidence that once the conflict ends, the rating will improve.
Israeli officials are concerned that this downgrade by Moody’s could lead other major agencies to also reconsider Israel’s outlook, potentially impacting the country’s ability to raise funds through bond sales. Michel Strawczynski, a professor of economics at the Hebrew University in Jerusalem, noted that the length of the war will determine the extent of the impact on the economy.
Past experiences have shown that Israel’s economy has managed to recover after conflicts with Hamas. However, the current war has been longer and has resulted in significant military expenditures and reservist call-ups that strain the economy by reducing the workforce. Despite these challenges, Bank of Israel Governor Amir Yaron stated that the Israeli economy is resilient and already showing signs of recovery following the war.
Even before the conflict, Israel has faced economic difficulties, including concerns over governance, rising inflation, and a global slowdown in tech investments. Prime Minister Netanyahu’s proposed judicial overhaul, which aimed to reduce the powers of the country’s courts, also affected Israel’s coffers.
Moody’s had previously expressed concerns that the proposed judicial overhaul could weaken Israel’s investment climate. However, the agency praised the decision to shelve the plan in January, highlighting the “strong checks and balances” in Israel’s governance.
The impact of the Moody’s downgrade on Israel’s economy will depend on the duration of the war. Israel, known for its entrepreneurial spirit and strong economy, has the potential to bounce back, but the challenges posed by the current conflict are significantly greater than those faced in the past.
Analyst comment
Neutral news.
As an analyst, the downgrade by Moody’s will increase concerns about Israel’s ability to raise funds through bond sales. Other agencies may follow suit, impacting the country’s outlook. The length of the ongoing war will determine the extent of the economic impact. However, Israel’s resilient economy has previously recovered from conflicts, and signs of recovery are already being seen. The challenges posed by the current conflict, along with pre-existing economic difficulties, will require careful management to ensure a bounce back.
