Moody's Credit Rating Agency will publish an unusual report on Israel's economic outlook on Tuesday evening. 24 hours after the passage of the law to reduce the use of reasonableness grounds in the High Court of Justice, and after a day of turmoil in the markets and in foreign currency, the credit rating agency decided to publish an exceptional report on the Israeli economy.
On April 14 of this year, Moody's downgraded Israel's rating horizon "due to concerns about the legal reform." The rating agency kept the credit rating at A1, but following the turmoil in the political and economic system, it decided to lower the forecast horizon from positive to stable.
Moody's statement at the time said that the change in outlook to stable from positive reflected a deterioration in the Israeli administration, as illustrated by recent events surrounding the government's proposal to change the country's judicial system. While the mass protests led the government to pause legislation and seek dialogue with the opposition, the manner in which the government has attempted to implement large-scale reform without seeking broad consensus indicates a weakening of institutional strength and policy predictability.
The rating agency explained the decision: "Recent events offset the positive developments that led Moody's to provide a positive outlook in April 2022. The developments surrounding the government's proposal to change the judicial system reflect a deterioration in the state of government in Israel. The manner in which the government attempted to implement a large-scale reform without reaching broad consensus indicates a weakening of the resilience of Israel's institutions and the ability to predict policy.
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