Minister of Finance Bezalel Smotrich gave an initial reaction last night to the downgrade of Israel’s sovereign rating by Moody’s to Baa1. In his statement, Bezalel tries to soften the blow, and promises to pass a budget, hinting at planned austerity measures, perhaps in an attempt to send a signal to the other rating agencies. Notably, unlike on previous such occasions, Smotrich refrained from making a sharply worded attack on the decision itself.
"Israel’s economy is bearing the yoke of the longest and most expensive war in the country’s history… the Israeli economy is a strong economy that even now attracts investment," Smotrich said. "With God’s help, we shall pass a responsible budget with the required restraining measures, and after the victory in the war those who downgraded the rating will restore it to the true level of the Israeli economy."
In its decision, Moody’s not only points to the higher risks that the Israeli economy faces, but also criticizes the government’s response to those risks. "The key driver for the downgrade is our view that geopolitical risk has intensified significantly further, to very high levels, with material negative consequences for Israel's creditworthiness in both the near and longer term. Longer term, we consider that Israel's economy will be more durably weakened by the military conflict than expected earlier," it states in its decision, but adds, "In our view, the significant escalation in geopolitical risk also points to diminished quality of Israel's institutions and governance which have not fully mitigated actions detrimental to the sovereign's credit metrics."
Published by Globes, Israel business news - en.globes.co.il - on September 29, 2024.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2024.