The bond credit agency warns of “significant risk” over judicial reform crisis.
By Meir Dolev, World Israel News
U.S. investment bank Morgan Stanley marked down Israel’s credit rating to a “dislike stance” as bond credit rating agency Moody’s warned of a “significant risk” posed by the ongoing crisis over the judicial changes following Monday’s vote on the ‘reasonableness’ bill.
“We see increased uncertainty about the economic outlook in the coming months and risks becoming skewed to our adverse scenario,” Morgan Stanley said, pointing to Israel’s “ongoing uncertainty” and the loss of value of the shekel.
“Markets are now likely to extrapolate the future policy path and we move Israel sovereign credit to a ‘dislike stance.’”
Meanwhile Moody’s warned that there is “a significant risk that political and social tensions over the [judicial reform] will continue, with negative consequences for Israel’s economy and security situation.”
“The wide-ranging nature of the government’s proposals could materially weaken the judiciary’s independence and disrupt effective checks and balances between the various branches of government, which are important aspects of strong institutions,” the agency said.
Prime Minister Benjamin Netanyahu issued a response to Moody’s alert on Tuesday, expressing confidence in the country’s economy. “When the dust settles, it will be clear Israel’s economy is very strong,” the statement from his office said.
“Israel’s economy is based on solid foundations and will continue to grow under a strong leadership that leads a responsible economic policy.”
Moody’s downgraded Israel’s credit outlook in April from positive to stable, following a similar warning from British bank HSBC about potential adverse economic outcomes due to the reform.