Israeli Prime Minister, Benjamin Netanyahu, has responded to recent economic developments, downplaying the significance of the recent decline in Israel’s credit rating. He assured the public and international observers that the economic fluctuations were solely a result of the nation’s ongoing conflict with Hamas, and not indicative of a broader, inherent economic instability.
Recent news from the credit rating agency, Moody’s, has roused international attention and concern. For the first time in its history, Moody’s has downgraded Israel’s credit rating from A1 to A2. Accompanying this downgrade is a “negative” outlook, a forecast that is largely rooted in the instability driven by the war against Hamas. Furthermore, there are growing concerns over a potential large-scale conflict expansion against the Hezbollah militias in Lebanon, which could further exacerbate the economic situation.
In a statement reported by the ‘Times of Israel’, Moody’s elaborated on the rationale behind their assessment. They highlighted the ongoing military conflict with Hamas and the wide-ranging consequences that have significantly elevated the political risk for Israel. The conflict has also weakened the Israeli government, its legislative institutions, and the nation’s fiscal strength, particularly in the short term.
Moody’s further underscored the negative outlook by pointing to the potential “risk of escalation” with Hezbollah militias on Israel’s northern border. This area has been the scene of constant artillery exchanges practically since the onset of the war with Hamas on October 7.
In response to Moody’s assessment, Prime Minister Netanyahu swiftly issued a statement. He maintained that the Israeli economy – which is currently led by Finance Minister Bezalel Smotrich, a prominent ultranationalist figure in the executive branch – is not responsible for the downgrade in the credit rating. Instead, Netanyahu ascribed the downgrade to the chaos caused by the conflict with Hamas.
Netanyahu confidently declared, “Israel’s economy is strong. The rating drop is not connected to the economy but is entirely due to the fact that we are at war. When we win the war the ratings will go up again. And we are going to win it.”
This downgrade represents a significant shift, as it is the first since Moody’s began evaluating Israel’s creditworthiness in 1998. The implications of such a change could be far-reaching, potentially leading to an increase in interest rates or a weakening of the national currency, the shekel.
