Prime Minister Benjamin Netanyahu and Finance Minister Bezalel Smotrich on Saturday night responded to Moody’s lowering of Israel’s economic outlook from “positive” to “stable” while also affirming the Jewish state’s A1 rating.
“Israel’s economy is stable and solid and with God’s help, it will remain so,” the joint statement from Netanyahu and Smotrich said.
The credit ratings agency on Friday published an update on Israel’s credit rating, which comes amid a fierce domestic debate over the government’s judicial reform initiative.
“Recent events around the government’s plans for an overhaul of the judiciary point to a deterioration of Israel’s institutional and governance strength,” Moody’s said.
The government’s handling of judicial reform “exposed some weakness in Israel’s executive and legislative institutions,” it added.
While saying the ongoing demonstrations show the strength of Israel’s civil society, the report added that they also expose deep divisions that “will likely keep social and political risks elevated for some time.”
Increasing polarization “would risk undermining policy effectiveness and economic strength over the medium term,” the report warned.
The last time that Israel received a “stable” credit rating outlook was in April 2020, at the start of the COVID-19 pandemic. It was upgraded to “positive” in April 2022.
Netanyahu and Smotrich called the concerns expressed by Moody’s “natural for those who do not know the strength of Israeli society,” while emphasizing the country’s resilience in overcoming national crises.
“The State of Israel is a strong democracy, and because of that, Israeli citizens hold lively discourse over issues that are the center of controversy in Israeli society, and those are signs of the strength of Israeli democracy,” the ministers said in their joint statement.
The New York-based credit rating service retained Israel’s A1 rating, reflecting the country’s “strong economic growth and improving fiscal strength which Moody’s expects to continue in its baseline scenario.”
The report continued that “the economy has proven resilient to many economic and geopolitical shocks over the past decades and has grown at a rapid clip, helped by Israel’s globally competitive high-tech industries.”
Netanyahu and Smotrich in their statement praised Moody’s for “correctly identifying the strength of Israel’s economy in all indexes and the correct and responsible economic leadership that we lead, with the wise management of public spending and the advancement of growth-encouraging reforms.”
Since the right-wing coalition led by Netanyahu came to power at the start of the year and began acting on its legislative agenda in the Knesset, the country has seen massive demonstrations against judicial reform and, more recently, counter-rallies in support of the program.
Following a nationwide general strike on March 27, Netanyahu temporarily suspended the proposed legislation until the Knesset’s summer session in the hopes of reaching a compromise with the opposition during the parliamentary break.