MOODY’S SET TO LOWER ISRAEL’S CREDIT RATING FOR THE SECOND TIME IN 2024

Sat 28 September 2024:

Moody’s Investors Service is preparing to lower Israel’s credit rating for the second time this year, citing growing political instability and economic uncertainty. The downgrade follows concerns over the country’s contentious judicial reforms and their impact on Israel’s institutional framework and economic performance.

In its latest review, Moody’s highlighted the government’s ongoing efforts to overhaul the judiciary, which has sparked widespread protests and increased tensions within the country. These developments have raised red flags for investors and financial markets, potentially undermining the stability that has traditionally supported Israel’s strong credit standing.

The global credit rating agency previously downgraded Israel’s outlook earlier in the year, warning that the proposed judicial changes could harm Israel’s economy by reducing investor confidence and weakening checks and balances that ensure long-term political and economic stability. The reforms, led by Prime Minister Benjamin Netanyahu’s coalition, have faced fierce opposition from civil society, business leaders and international observers.

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A second downgrade would put further pressure on Israel’s economy, increasing borrowing costs and potentially leading to a reduction in foreign investments. It could also have a ripple effect on the country’s tech sector, which has been a key driver of its economic success in recent decades.

Economists warn that political uncertainty, combined with the potential rating downgrade, could slow Israel’s GDP growth, strain public finances and widen the fiscal deficit, especially in light of ongoing security challenges in the region.

Israel’s Finance Ministry has pushed back against the criticism, asserting that the economy remains resilient and that the judicial reforms are necessary to ensure long-term stability. However, Moody’s upcoming decision suggests that global financial institutions remain sceptical of the government’s ability to maintain both economic and political balance amid the growing internal divisions.

The final decision on Israel’s credit rating is expected to be confirmed in the coming weeks.

-MEMO

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