Last night, senior officials at the Ministry of Finance presented a warning document to Finance Minister Bezalel Smotrich about the potential economic consequences of the legal reform legislation. They discussed Israel’s macro data and noted the possible risks and opportunities of the reform and the protest against it. According to the document, the economy is expected to lose between 15 and 30 billion shekels per year in the event of a credit rating downgrade resulting from the legal reform legislation. The credit rating companies Moody’s and Fitch have already warned of the possible consequences of the legislative procedure on Israel’s credit rating and economic situation, which could negatively affect the level of investment in the country. The officials emphasized that the government and the Knesset must take significant effects into account when promoting the proposed legislative amendments. They suggested presenting a unified outline before making a decision regarding the measures at hand and how to advance them, so that the Ministry of Finance will have time to examine the attitude of the relevant international bodies in the short and long term. Finance Minister Smotrich believes that social cohesion and stability are important for the Israeli economy, but also recognizes the opportunities that the legal reform could provide. He is confident in Israel’s ability to overcome the current dispute and steer the economy with broad national responsibility.
Senior officials at the Ministry of Finance last night (Monday) presented Finance Minister Bezalel Smotrich with a severe warning document that predicts the economic consequences that may occur following the legal reform legislation and greatly affect the Israeli economy. In the senior officials’ discussion with the Minister of Finance, Israel’s macro data were presented and the possible risks and opportunities of the reform and the protest against it were noted. According to the document, in the event that the credit rating is downgraded as a result of the legal reform legislation, the economy is expected to lose between 15 and 30 billion shekels per year.
The warning document refers to the publication of the credit rating companies Moody’s and Fitch, which warned about the possible consequences of the legislative procedure on Israel’s credit rating and economic situation. “The reference of the rating companies is of great significance since their professional assessment provides investors with information about the inherent risks and prospects. Even without a credit rating downgrade, the expectations of its downgrade are enough to cause negative consequences on the level of investment in the country already in the immediate time frame. Publication of an unusual review that is not fully qualified, as done by Moody’s company signals to investors that the state of the economy requires attention and creates negative expectations regarding the viability of investing in the country.”
“As of this time, it is evident that the proposed changes in the legal system are perceived by the relevant international bodies as those that may weaken the state’s institutions. The strength of the institutions is a major consideration in determining the credit rating of Israel and of Israeli companies. Therefore, to the extent that the credit rating companies do It will be understood that the legislative measures will weaken the institutions, their approval may lead to a downgrade, for all the economic implications involved as discussed above,” the document emphasized.
According to the document, the government and the Knesset must “take into account significant effects when promoting the proposed legislative amendments”. Also, the officials emphasized in the document that “the effects of the negative sentiment in the markets may materialize even in a scenario where the legislative measures are promoted separately and gradually.”
In view of the meanings presented in the document, it was suggested that before making a decision regarding the measures at hand and how to advance them – a unified outline would be presented. This is, among other things, so that the Ministry of Finance will be given time to examine in depth the attitude of the international bodies relevant to it in the short term and in the long term, which will allow the professionals in the Ministry of Finance to reflect to the government in the most accurate manner the potential economic consequences of the outline that it intends to approve.
In response, Smotrich said that “stability and social cohesion are important elements for the State of Israel as a society and for the Israeli economy, which is always affected by expectations and requires stability. My position regarding the reform is known and I believe that it has great opportunities for the economy and the economy, in the area of legal certainty and a renewed synergy between authority and responsibility in a way that will bring to a more flexible risk management model, which will lead to a reduction in bureaucracy and regulation and in any case to great growth.”
“Nevertheless, our role is to prepare for every scenario and formulate answers in the areas of continuing to encourage capital investments in all sectors of the economy, developing infrastructure, formulating a response to the challenges of the housing market in an environment of high interest rates and expectations of falling prices, providing a response to the cost of living and more. Our role is also to market to the markets and to the parties with whom we are in contact in the worlds The international economists the strength of the Israeli economy in the face of the international economic crisis, the strength of Israeli democracy and the confidence in the ability of Israeli society to overcome the current dispute, as we have managed many disputes in the past, in a good way and even come out of it stronger and more united, and I am confident that this is what we will all do. We will continue With God’s help, steer the economy with broad national responsibility,” he said.