Confrontation between Smotrich families: "Your son is not in the army and mine is serving in Gaza"/Israel Hayom's Tomorrow Conference
Strong criticism of the center of the opposition in the finance committee, MK Vladimir Blayak. "The reputation of Israel's economy in the financial world is on the rocks," writes Blayak.
According to him, "downgrading by the two leading agencies in the world will cost us tens of billions of shekels in the coming years. Contrary to Netanyahu's false statements, the rating will not rise 'immediately at the end of the war'. It will take the State of Israel years to repair the damage."
How will the downgrade affect us? According to Blayak, "We will pay more on the debt, leaving less for education, health and welfare. Israeli citizens who work and serve will pay more for medicine, for education, for housing and also for the shopping basket at the supermarket. Everything is connected to everything."
Blayak criticizes Netanyahu and Smotrich: "You will not see videos today about Netanyahu and Smotrich, and even in the studios they will probably mention it only as a passing comment. But that's what really matters today. This is a shameful and resounding failure of the government. An inflated, arrogant, insolent and unprofessional government. It can be done differently, it must be done differently. Even during the war."
The Ministry of Finance tried to soften the blow. The Accountant General at the Treasury, Yahli Rotenberg, said this morning that "the decision of the S&P rating company came in direct response to the Iranian missile attack, and the rating company estimates that the increase in geopolitical and security risks could have a negative impact on the government deficit and the performance of the economy.
"The company positively notes the ability of the Israeli economy to withstand In the face of economic and geopolitical shocks, the strength of Israel's external accounts, also in relation to the countries of reference, and the high foreign exchange reserves that allow the economy room for maneuver. routine and emergency and with high coverage ratios, as was also proven in the international issue from March 2024."
Rotenberg further added that "it is important to emphasize that investors in the world and in Israel proceed with the knowledge that the bonds of the State of Israel are a safe and liquid asset and that the Israeli economy is diverse, innovative and fundamentally strong. The State of Israel will successfully face all the challenges it will face. We must act with fiscal responsibility in order to ensure long-term growth of the economy and a decrease in the debt-to-GDP ratio."
Mixed reactions were recorded in the market this morning, ranging from the optimism of the download without any significant economic significance, to the continued pessimism of the economic uncertainty.
Erez Zadok, CEO and chief investment strategist at Aviv Beit Investments, is among the optimists: "The downgrading of Israel's credit rating by S&P does not come as a surprise to the Israeli economy, which has already experienced a downgrade by Moody's alongside a negative forecast by Fitch .
"It should be remembered that even after the downgrade, Israel's credit rating is still high, and the local macroeconomic data emphasize the strength of the Israeli economy, such as the debt to GDP ratio of 69%, the unemployment rate of 3.1%, and a high growth forecast for next year set by the Bank of Israel, inflation that is still within the target range, and more.
"In addition, the market has already priced in the downgrade of the credit rating carried out by 'Moody', so the downgrade of S&P is not expected to have a significant economic impact.
"A lot of water has flowed in the Israeli economy since the Corona , and this alone shows how strong the Israeli economy is, since during the plague we reached a deficit of about 11.5% and the estimate at the time was that it would take ages to lower its rate. Today, 7 months into the war, with the biggest regional threats we've ever known, we're barely even halfway there."
Eyal Haim, VP of Marketing and Sales at Ayalon Mutual Funds, is less optimistic: "The downgrade will make it difficult for the Bank of Israel to keep moving towards downgrading the interest rate, thus allowing financial oxygen for businesses in the economy.
"The downgrade itself will not change the market pricing, since it corresponds with the downgrade made by Moody's, whose latest rating is even lower than the current downgrade by S&P, and with the negative forecast placed by Fitch for Israel's rating - the same left as is. That is, it is already embodied in Israel's risk premium. But the concern is about the state of the businesses in the economy, as it does prevent a horizon for the breathing space they so need, especially among businesses that are biased towards financing such as real estate."
Everyone in the market agrees on one thing - the Israeli economy is expected to contain the downgrade without immediate shocks to its economy. Now the eyes are directed mainly towards the main barometer for her examination: the shekel-dollar exchange rate.
Tonight the credit rating agency S&P announced that it lowered the credit rating of the State of Israel to A plus. This, after previously standing at AA minus. A major factor in the downgrade was the escalation of the conflict with Iran, which is added to the precarious security situation.
"We predict that Israel's government deficit will increase to 8% of GDP in 2024, mainly as a result of increased defense spending," S&P Global said in a statement. With Iran."
The company also added in its announcement that "a wider regional conflict, which is not the company's base scenario, may have another substantial negative impact on the security situation of the State of Israel, and as a result on its economic, fiscal and balance of payments parameters."
The severe report of the rating company from the night states that "the company currently sees a number of possible military escalation risks, including a substantial, direct and more lasting military conflict with Iran. Israel is facing international pressure to contain its response to the April 13 attack, while Iran has announced its intention not to escalate. However, in the company's opinion, there is a risk of accidents or miscalculations, especially if there are further exchanges of fire between the two sides.
"Another scenario involves the expansion of the conflict with Hezbollah on Israel's northern border. This scenario could materialize in the event that Hezbollah's attacks increase or that Israel decides to launch a military campaign in Lebanon in order to establish a security zone and keep Hezbollah away from the Lebanese side of the border."
The company presents a scenario in which the US will stop financially supporting Israel. According to the report, "the company's forecasts take into account the continued financial support of the United States to Israel. However, this may be questioned if the differences of opinion between the two countries on the developments in Gaza will continue, In light of the US's publicly stated concerns about the growing civilian cost of the conflict in Gaza,
the international rating company Fitch announced that, contrary to expectations, it did not lower Israel's credit rating, leaving it at A plus from Israel the "Negative Watch" However, at the same time, the company updated its rating forecast regarding Israel from "Stable" to "Negative".