Credit rating agency Moody's announced Saturday that it will downgrade Israel's credit rating, the first downgrade in the country's history, and also assigned a “negative outlook” to the new rating.
(Also: 'It could lead to a massacre': pressure grows on Israel to agree to a truce with Hamas)
The solvency grade of the Israeli economy thus went from the maximum of A1 to A2, Moody's announced in the first downgrade of Israel's rating since its bonds began to be rated by international investment risk assessment agencies about three decades ago. .
(You can read: The looming crisis in UNRWA due to the suspension of 51% of funds: this is how it affects Gaza)
Moody's explained that The downgrade was made after “evaluating the current military conflict with Hamas, and its broader consequences that materially increase the political risk for Israel, weaken its executive and legislative institutions, and its fiscal strength, in the near future.”.
(Also: Israel: between the dilemma of rescuing more hostages or ending the war in Gaza)
The budgetary burden that the Gaza war implies, the expense of weapons, the payment of soldiers, the slowdown in the economy due to the mobilization of more than 360,000 reservists who have had to leave their jobs; They have hampered Israel's economic growth and placed a burden on public finances and debt.
The rating agency also lowered its outlook for Israel's debt to “negative” due to the “risk of escalation” with the Lebanese group Hezbollah, much more powerful than Hamas, and which operates along its northern border.
“The Israeli economy is strong. The downgrade of the rating has nothing to do with the economy, but is entirely due to the fact that we are at war,” Israeli Prime Minister Benjamin Netanyahu defended in a statement after Moody's announcement.
(You can read: South Africa asks ICJ to urgently examine Israel's military expansion in southern Gaza)
The Israeli economy is strong. The downgrade has nothing to do with the economy, but is entirely due to the fact that we are at war.
“The rating will go up again the moment we win the war, and we will win it,” he predicted.
After the Hamas attack on October 7 that started the war, the Strandard & Poors agency already lowered Israel's credit outlook from stable to negative due to the risk of expansion of the conflict; while the other major credit agency, Fitch, put Israel “under negative watch” for the same reason.
Moody's announcement came as the coalition government amends the 2024 budget to adapt it to wartime.
(Also: Biden reveals that he is working on an agreement for the release of hostages and a truce in Gaza)
The budget bill for 2024 was already approved in first reading last Wednesday in the plenary session of Parliament, which must vote on it two more times before its approval.
Lawmakers voted 57-50 to approve the additional 584 billion shekel ($159 billion) war spending package.
The Israeli Government must increase bond issuance to finance its budget deficitwhich jumped to 4.8% of GDP by the end of January 2024 and is expected to reach 6.6% of GDP by the end of 2024.
(You can read: Moving images of hostages rescued in Israel after 5 months in the power of Hamas)
Israeli Central Bank downplays to the decision
The governor of the Israeli Central Bank, Amir Yaron, this week downplayed the Moody's agency's report of downgrading Israel's credit rating, but urged the Government and Parliament to address the issues raised by the rating agency.
“To strengthen the confidence of markets and rating companies in the Israeli economy, it is important that the Government and (Parliament) Knesset act to address the economic issues raised in the report,” Yaron said, in reactions reported by several local media.
(Also: UNRWA denounces the death of one of its workers in Gaza due to Israeli gunfire)
For the governor of the Central Bank, “The State of Israel has experienced geopolitical crises in the past during periods when the debt-to-GDP ratio was much higher and there was never any delay in the payment of public debt”.
Likewise, he assured “that it is important to remember the high growth potential of the economy and the structural surplus of the current account balance.”
INTERNATIONAL EDITORIAL
*With information from EFE
#Moody39s #agency #Israel39s #credit #rating #time