Moody’s warns investors of Israel’s ‘high political risks’

Despite the negative tone of the most recent update, the agency did not lower Israel’s credit score any further.

By Lauren Marcus, World Israel News

International financial research group Moody’s warned that Israel’s current political environment makes it a riskier choice than in the past for potential investors.

“Uncertainty over Israel’s longer-term security and economic growth prospects are much higher than is typical, with risks to the high-tech sector particularly relevant, given its important role as a driver of economic growth and significant contributor to the government’s tax take,” Moody’s said in a periodic report, accompanying Israel’s credit rating of BAA1, the lowest in the Jewish State’s history.

“Such negative developments would have potentially severe implications for the government’s finances and may mark a further erosion in institutional quality,” the report added.

In September 2024, Moody’s reduced Israel’s rating to BAA1, down two ranks from A2, citing the ongoing war against Hamas and Hezbollah.

Two months later, shortly after the Israel-Hezbollah ceasefire, Moody’s issued a statement acknowledging that some of Israel’s risks “appear[ed] to have partially diminished.”

However, the agency did not raise Israel’s ranking and maintained a negative outlook, citing continuing domestic, political risks.

Despite the negative tone of the most recent update, the agency did not lower Israel’s credit score any further.

“We may stabilize the outlook if there are clear prospects for a durable cooling down of the military conflicts, in turn allowing Israel’s institutions to formulate policies that support the recovery of the economy and public finances and restore security while dealing with a wide range of policy priorities,” Moody’s said.

The outbreak of the October 7th war has seriously impacted the Israeli economy, along with global inflation hurting Israeli consumers’ purchasing power.

By July 2024, at least 46,000 Israeli businesses shuttered due to the war.

Also in July, the Port of Eilat was forced to declare bankruptcy.

Repeated Houthi attacks on Israel and American-linked ships in the Red Sea saw the port denied any revenue or activity for more than eight months.