Moodys Downgrades Israels Credit Rating, Finance Minister Calls it a Political Manifesto

Tel Aviv, Feb 11 (AP): Israel's finance minister, Bezalel Smotrich, has vehemently criticized the decision by financial ratings agency Moody's to downgrade Israel's credit rating. Smotrich dismissed the announcement as a "political manifesto" devoid of substantial economic arguments.

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Moody's Downgrades Israel's Credit Rating

On Friday, Moody's downgraded Israel's debt rating, citing concerns about the ongoing conflict in Gaza and the potential for a war with Hezbollah in the north. This marks the first time Moody's has lowered Israel's credit rating, which serves as a crucial indicator of investment risk for global entities and governments. The downgrade from A1 to A2, accompanied by a "negative" outlook for the country's economy, nevertheless maintains a relatively low-risk assessment according to Moody's.

Finance Minister's Response

Finance Minister Smotrich expressed outrage over the decision, stating that it reflects a lack of confidence in Israel's security, national strength, and the righteousness of its actions against its adversaries. Prime Minister Benjamin Netanyahu, however, asserted that Israel's economy remains robust, attributing the downgrade solely to the ongoing conflict. Netanyahu expressed optimism that the rating would improve once the war concludes.

Potential Economic Impact

Israeli officials harbor concerns that the Moody's downgrade may prompt other major agencies to follow suit, potentially affecting the country's economy. Michel Strawczynski, a professor of economics at the Hebrew University in Jerusalem and former director of the research department at the Bank of Israel, explains that a downgrade could make it more challenging for the government to raise funds through bond sales. The impact on the economy, however, hinges on the duration of the conflict, with a prolonged war likely to have a more significant effect.

Economic Challenges Beyond the Conflict

Even prior to the recent conflict, Israel's economy faced various challenges. Despite its entrepreneurial prowess and economic standing comparable to Western European nations, concerns about governance, rising inflation, and a global slowdown in tech investments weighed heavily on the economy. Prime Minister Netanyahu's proposed judicial overhaul, which aimed to weaken the powers of the country's courts, further contributed to economic uncertainty.

Moody's Concerns and Judicial Overhaul

Moody's had previously expressed concerns that the proposed judicial overhaul could undermine Israel's investment climate. The agency's report released on Friday commended the "strong checks and balances" that led to the shelving of the judicial overhaul in January.