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.

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Prime Minister Benjamin Netanyahu, Finance Minister Bezalel Smotrich say that lowered credit rating does not reflect the reality of Israel’s “strong” wartime economy.

By World Israel News Staff

A decision to downgrade Israel’s credit rating, which could impact the country’s economy and investors’ willingness to fund Israeli companies and projects, was described as “politicized” by Israel’s top finance official.

On Friday, U.S. credit agency Moody’s lowered Israel’s rating from A1 to A2.

The “ongoing military conflict with Hamas, its aftermath and wider consequences materially raise political risk for Israel, as well as weaken its executive and legislative institutions and its fiscal strength, for the foreseeable future,” Moody’s wrote in an explanation for the move.

Moody’s also changed Israel’s overall economic outlook from “stable” to “negative,” due to the risk of a conflict in the near future with Lebanese terror group Hezbollah.

But Finance Minister Bezalel Smotrich challenged that explanation. He wrote on X that Moody’s decision was motivated by politics, rather than a downturn in Israel’s wartime economy.

“The Israeli economy is strong by all measures. It is capable of sustaining all war efforts, on the front line and home front, until, with God’s help, victory is achieved,” Smotrich tweeted on Saturday evening.

“Moody’s announcement on the downgrade does not include serious economic arguments and is entirely a political manifesto based on a pessimistic and unfounded geopolitical worldview, which reflects a lack of confidence in Israel’s security and national resilience, as well as an apparent lack of confidence in the righteousness of its path in the face of enemies,” he added.

Prime Minister Benjamin Netanyahu issued an unusual public statement on Shabbat making similar remarks about the downgrade. Typically, the premier does not make statements on the Jewish day of rest, except for emergencies.

“The Israeli economy is strong. The rating downgrade is not connected to the economy, it is entirely due to the fact that we are at war,” Netanyahu said.

“The rating will go back up the moment we win the war. And we will win the war,” he added.

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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.

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The rating agency cited “a deterioration of Israel’s governance.”

By World Israel News Staff

Bond credit rating agency Moody’s Investors Service on Friday changed the outlook on Israel’s credit ratings from positive to stable, prompting Prime Minister Benjamin Netanyahu to issue a statement calling Israel’s economy “robust and stable.”

The news followed an earlier report released by Moody’s in early March warning that if the government’s plans for judicial reform were implemented in full, they would “materially weaken the strength of the judiciary and as such be credit negative.”

“The change of outlook to stable from positive reflects a deterioration of Israel’s governance, as illustrated by the recent events around the government’s proposal for overhauling the country’s judiciary,” the credit rating agency said in its announcement on Friday.

“While mass protests have led the government to pause the legislation and seek dialogue with the opposition, the manner in which the government has attempted to implement a wide-ranging reform without seeking broad consensus points to a weakening of institutional strength and policy predictability,” it added.

“As a result, the risks on Israel’s rating are now balanced, leading to a stable outlook. On the downside, while the deliberations about the exact form of the judicial reform continue, the government has reiterated its intention to change how judges are selected. This means that the risk of further political and social tensions within the country remains,” said Moody’s.

It added that if, on the other hand, a solution is reached, “the positive economic and fiscal trends that Moody’s had previously identified remain.”

It went on to say that that Israel’s economy, helped by globally competitive high-tech industries, has “proven resilient to many economic and geopolitical shocks over the past decades and has grown at a rapid clip.”

Netanyahu and Finance Minister Bezalel Smotrich released a joint statement in response to the downgrade, saying “Israel’s economy is stable and robust and will remain so.”

The two blamed Moody’s analysts for not understanding “the strength of Israeli society, its unity, and its ability to overcome controversy and crises.”

“The state of Israel is a strong democracy, and because of that, Israeli citizens hold lively discourse over issues that are the center of controversy in Israeli society, and those are signs of the strength of Israeli democracy,” the statement said.

“Fierce political controversies lead to protests and can create temporary uncertainty; those are the risks that are considered and defined in the state of Israel’s economic assessments,” they said, adding that there would be no harm either to Israel’s democracy or to its economy.

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Moody’s upgraded the rating of Israel’s economy to “positive” thanks to fiscal discipline and high growth. 

By: World Israel News Staff

Moody’s, the British credit-rating firm, upgraded Israel’s government rating from “stable” to “positive” on Friday.

Moody’s named two reasons for the upgrade: fiscal discipline and strong economic growth.

Prime Minister Benjamin Netanyahu said at the beginning of the cabinet meeting on Monday that after the Moody’s upgrade, the cabinet will approve a decision to “advance Israeli activity in the field of international development.”

“Israel is a global leader in technology, agriculture, water, health and medicine,” he said. “We have vast export potential and we are realizing it thanks to the correct policy of the government. The moves that we are leading will strengthen not only the Israeli economy, but also our diplomatic ties on every continent.”

Moody’s noted that the Israel government debt ratio has declined by more than 10 percentage points to 60% of GDP, reflecting both “prudent budgetary framework” and “robust growth performance,” driving tax revenues.

Israel’s situation was considered better than many comparable nations’ economies.

According to Moody’s, “Israel is one of only a handful of advanced economies (including Norway, Switzerland and Singapore, which are all rated AAA with a stable outlook) with a lower debt to GDP ratio today than before the [2008] global financial crisis.”

Moody’s also pointed out that Israel’s annual budget deficits have remained below 3% of GDP over the past four years.

The agency said that it expected Israel to continue to maintain annual budget deficits of no more than 3% of GDP in coming years as well as additional “tax windfalls” from the sale of hi-tech companies.

Natural gas reserves, which increasingly will be utilized, should also help offset ongoing pressures for higher social spending and tax cuts, Moody’s said.

Moody’s noted that Israel’s economy has demonstrated robust economic growth since 2008, with real GDP growth averaging 3.5% over the past decade, stronger than the median of A1 rated peers (2.9%).

The economy has reached full employment, with labor participation at around 80% among 25-64 years olds in 2017 and unemployment falling consistently since 2009 to below 4% this year.

Moody’s attributed Israel resilient economy to “its diversified industries, ranging from agriculture to high-technology products and services, and a strong culture of innovation.”

Israel ranked third place on the World Economic Forum’s Global Competitiveness Index for innovation, behind the United States and Switzerland.

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Policies set by Israel’s leaders are setting Israel’s economy on a stable path in a world of turmoil. 

A new report by international credit ratings agency Moody’s praised Prime Minister Benjamin Netanyahu and Finance Minister Moshe Kahlon for their economic policies.

Moody’s had affirmed Israel’s A1 credit rating last September, assessing the country’s economic outlook as stable.

In the new report, issued Thursday, Moody’s economists examined data on Israel’s debt-to-gross domestic product (GDP) ratio, figures that were released last week by Kahlon and outgoing Finance Ministry Accountant General Michal Abadi-Boiangiu. The ratio reached an all-time low of 62.1 percent in 2016, an accumulated 9-percentage-point drop from Israel’s debt-to-GDP ratio in 2009, amounting to around 100 billion shekels (more than $26 billion).

According to the report, Israel is one of the only countries in the world whose debt-to-GDP ratio has dropped since the 2009 global financial crisis.

The report also stressed that security incidences have historically had a marginally low influence on the Israeli economy, state budget and government deficit.

By: JNS.org

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