The question in the mind of many economists revolves around Israel's credit rating - Will Israel be downgraded? The Moody's credit rating agency is slated to dispatch a group of economists to Israel next month, who are scheduled to hold meetings with notable Israeli businessmen and politicians, all of who are somewhat apprehensive about the report Moody's is set to publish in October about the Israeli economy.
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Among those scheduled to confer with Moody's economists are Finance Minister Bezalel Smotrich, Governor of the Bank of Israel Amir Yaron, President of The Manufacturers Association of Israel Ron Tomer, the CEOs of Israel's major banks, and Knesset members from both the coalition as well as the opposition.
Finance ministry officials have spoken out privately in recent days, claiming the uncertainty that stems from ongoing judicial overhaul debates, the weakening of Israel's currency and and the erosion of Israel's defense apparatus could all lead to a rather unfavorable 2024 report.
In April, Israel's sovereign credit rating was reaffirmed at "A1" by the agency, but there was a shift in the outlook on the credit ratings of the Israeli government, which was downgraded from "positive" to "stable." Moody's pointed to concerns regarding the economy, primarily centered around "weakening institutional strength and policy predictability" as well as a noted "deterioration of Israel's governance."
Speaking with Bloomberg, Cedric Berry, Fitch's prominent analyst for Israel, clarified Fitch's positive outlook and its more lenient stance when juxtaposed with other global rating entities like S&P and Moody's.
"Even if Israel’s government lasts four years, it’s unlikely that a similar coalition would be formed afterward, so it would take a very strong reform drive to inflict a significant amount of damage, and we don’t think that’s where the government is headed," Berry emphasized.
Despite warning of possible ramifications should legislation to implement judicial reform proceed without broad agreement and despite ongoing protests nationwide, Fitch has chosen to keep Israel's rating as-is.
"The concern is genuine this time, since there is tangible data of the market slowing down, affecting things like tax revenue, the enlargement of the national deficit and potential investors apprehensive about the Israeli financial landscape. A political compromise is badly needed, and politicians of all Knesset parties should heed that warning," according to a senior official in the Finance Ministry who
spoke to Ynet off the record.
Other officials have expressed concern that 2024 could bring about unfavorable news on the unemployment front, despite Israel currently reporting some of the lowest unemployment rates in the world. "Unemployment always follows bleak economic reports," an official said.
Israel's solid economic data notwithstanding, senior Israeli market members have similarly expressed grave concern regarding rising deficits and inflation that, for the moment, is till under control. "It's likely much of that data will take a turn for the worse in 2024," a Finance Ministry official said.
Among Israeli businessmen, the prevailing sentiment calls for a lowering of the national temperature when it comes to egregious political debates, understanding the eyes of the world are still squarely focused on Israel.
Standard & Poor's, the third-largest credit agency is also expected to release its bi-annual report on Israel, but at this point whether they will choose to send a delegation of economists to Israel is anybody's guess.