Moody’s Expected to Publish Unusual Announcement Regarding Israel’s Credit Rating
Moody’s, the renowned credit rating agency, is set to release an unprecedented update on Israel’s credit rating, according to sources. Earlier this year, the agency downgraded Israel’s rating horizon from positive to stable due to concerns over the implementation of legal reforms.
Originally, Moody’s had planned to issue its regular update in October. However, due to the recent passage of a law abolishing plausibility by the Knesset on Monday, the agency will publish a special announcement tonight, possibly after 11:30 pm Israel time.
Following the news of the unusual update, the Tel Aviv Stock Exchange experienced further declines, while the dollar continued to strengthen against the shekel.
If Moody’s decides to downgrade Israel’s credit rating from stable to negative in this announcement, it will be seen as an indication that the agency may consider a further downgrade in the near future.
Moody’s analysts have previously demonstrated their expertise in analyzing Israel’s political and economic situation, particularly concerning the legal reforms. They were among the first to warn of the consequences of implementing a plan by the “Religious Zionist” party to weaken the legal system, even after the November elections. The agency stated that such reforms would have negative consequences for Israel’s credit rating.
A previous update published by Moody’s in March stated that Israel’s institutions were regarded as a supporting factor for a positive credit rating. The country was given a grade of a1, similar to the UK and higher than several EU nations, including Italy and Poland. However, Moody’s warned that if the legal reforms were fully implemented, there would be pressure to lower these scores.
The agency had already hinted in March that it may change the rating horizon if the legal reforms were enacted. The positive rating horizon announced in April 2022 was based on Israel’s impressive recovery from the COVID-19 crisis and its display of budgetary discipline. Nevertheless, Moody’s acknowledged that these factors may not be sufficient to offset any weakening of the institutions resulting from the implementation of legal reforms. Consequently, Moody’s downgraded Israel’s rating the following month.
In its April announcement, Moody’s highlighted that the government’s attempt to implement wide-ranging reforms without seeking broad consensus indicated a weakening of institutional strength. The protests against the legislation and subsequent negotiation attempts contributed to this halt in the implementation.
As Moody’s prepares to release its unusual update, it remains to be seen what impact this will have on Israel’s credit rating and the country’s overall economic outlook. Investors and financial markets are eagerly awaiting the agency’s assessment of the situation.