Global ratings agency Moody's is expected to lower Israel's credit ratings in the near future, Ynet has learned. The move will increase the cost of the nation's loans and be felt by Israeli households.
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Moody's is expected to publish a special negative report that would include criticism of the government's handling of the growing deficit and concerns that Israel's debt would increase from 60% to 68% within a short time span because of a failure by the government to reduce the deficit and concern over the possible exit of major companies from their activities in Israel.
Senior officials and Moody's met with senior economic leaders in Israel to discuss the stability of the market amid the war. They indicated there was little concern for Israel's economic stability in the short-term but said that they saw a problem in the government's insufficient response to the growing deficit, expected to reach 6.6 in 2024, and in the steps taken to reduce the economic damage from the cost of the war that has already reached some 225 billion shekels, half of the government's budget for the year.
In the report, Moody's is expected to note the government's failure to cut expenditure in the right places while funding aspects that are not seen as economically productive. The report will also criticize the government's decision not to raise taxes, a decision also criticized by the Bank of Israel.
Other concerns the report is expected to include are: The exit from Israel of major international companies or the reduction of their operations, the removal of businesses of Israeli investors, entrepreneurs and people of wealth to other markets abroad, the crisis in the high-tech industry which has been the major engine of the local economy and which has not shown signs of recovery.
Moody's is concerned that the war would continue and expand in 2024 which will cause more difficulties for the economy but most Israeli industry leaders said the repercussions to the economy would be in the short-term and they felt strongly that in the longer term the economy would return to its levels before the war and would also exhibit growth.
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Finance Minister Bezalel Smotrich and Prime Minister Benjamin Netanyahu
(Photo: Ronen Zvulin / EPA)
The ratings agency praised the central bank for its decision to lower interest rates. It had delayed its decision on lowering Israel's credit rating, to review the steps taken by the government but after what was seen as a disappointing budget proposal, Moddy's now believes there is no other option but lowering the credit rating from its current A1.
Standard and Poor's and Fitch are also expected to release their reports on Israel in the near future.