International ratings agency Moody's has left Israel's credit rating unchanged at A1 but downgraded its credit outlook from positive to stable. This is the first time since the Covid crisis that Israel's credit outlook has been cut and is exactly one year after Moody's praised Israel's economy and raised the credit outlook from stable to positive.
Moody's says that the change in the outlook is due to the judicial reform. Moody's wrote, "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. 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."
Moody's added, "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. On the upside, if a solution is reached without deepening these tensions, the positive economic and fiscal trends that Moody's had previously identified remain. All in all, the recent events offset the positive developments that had led Moody's to assign a positive outlook in April 2022, which related to strong economic and fiscal performance and the implementation of structural reforms by the previous government."
Published by Globes, Israel business news - en.globes.co.il - on April 15, 2023.
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