Moody’s overhaul warning
Credit rating agency Moody's Investors Service has lowered Israel's credit outlook from "positive" to "stable"
(Times of Israel) – Credit rating agency Moody’s Investors Service has warned about “negative consequences” and “significant risk” for Israel’s economy and security situation following the passage of the first bill of the government’s contested judicial overhaul.
In April, Moody’s lowered Israel’s credit outlook from “positive” to “stable”, citing a “deterioration of Israel’s governance” and upheaval over the government’s bid to dramatically overhaul the judiciary.
“Israel has no written constitution and its institutional set-up relies to an important extent on judicial oversight and review,” Moody’s said on Tuesday.
“The executive and legislative institutions have become less predictable and more willing to create significant risks to economic and social stability.”
Moody’s said some of its earlier concerns regarding the proposed reforms’ impact on Israel’s economy are also starting to materialise.
“Venture capital investments in Israeli high-tech firms have declined materially, with the sector raising $3.7 billion in the first six months of the year, the lowest figure since 2019,” Moody’s cautioned. “There are signs that Israel is decoupling from global trends.”
In response to the report, Israel’s government put out a statement, rebuffing it as a “momentary response”, adding that when the “dust settles it will become clear that Israel’s economy is very strong”.
US investment bank Morgan Stanley on Tuesday lowered Israel’s sovereign credit to a “dislike stance”, citing “increased uncertainty about the economic outlook in the coming months”.
“The current events in Israel are challenging … and making investors increasingly nervous with regards to Israeli assets,” Citi VP Michael Wiesen wrote. “We urge caution here and to wait for better levels/calmer market.”
Earlier on Tuesday, Israeli shares continued to take a dive and the shekel weakened for a second day amid market concern after the first bill of the contested judicial overhaul was ratified without broad consensus.
Psagot investment house chief strategist Ori Greenfeld told The Times of Israel, “In the immediate term, we are likely to see further weakening of the local currency which in turn fuels inflation and is a risk to additional interest rate hikes.”
The main concern among the business and tech community is that the proposed judicial overhaul will erode democracy and weaken checks and balances, which will make venture capitalists and other money-makers leery of investing in the country, triggering an outflow of funds.
comments