Press conference, Bank of Israel Governor Amir Yaron interest rate increase/Bank of Israel
Following the downgrading of the country's credit rating by the rating company Moody's, the governor of the Bank of Israel, Prof. Amir Yaron, calls on the government to address the issues and act to change the situation.
However, he mentions that Israel has never fallen behind in its debt repayments, even in difficult times.
Yaron said this morning that "according to the rating company's estimates, the public debt-to-GDP ratio should peak at 67% and then it is expected to decrease gradually. It should be noted that the State of Israel has experienced geopolitical crises in the past in periods when debt/GDP ratios were much higher and never There was some delay in the government's debt repayments. In this context, it is also important to remember the high growth potential of the economy and the structural surplus in the current account."
Yaron calls on the government to act to resolve the issues: "In order to strengthen the confidence of the markets and the rating companies in the Israeli economy, it is important that the government and the Knesset act to address the economic issues raised in the report. The Bank of Israel has already presented a number of courses of action in this spirit, including the approval of the 2024 budget in the Knesset with all the adjustments included in it."
Prof. Amir Yaron.
"It is important to remember the high growth potential of the economy and the structural surplus in the current account"
According to Yaron, "According to the company's announcement, the reason for the downgrading is the uncertainty regarding when and how the war will end, the effect of the war on the willingness of the government and the Knesset to deal with core economic and social issues, and the change in the fiscal situation. The reason for the negative rating horizon is the uncertainty regarding the expansion of the war into the northern arena.
"On the other hand , the company emphasizes that Israel's macroeconomic and monetary policy framework is solid and points to the resilience of the Israeli economy which is reflected in the rapid recovery from the initial shock caused by the war.
Already in the month of November, rapid signs of recovery were evident, manifested in a sharp drop in the unemployment rate and an increase in the level of activity, as reflected, among other things, in the increase in the volume of credit card purchases and in the business sector's estimates of activity in the coming months.
These trends intensified in December and January.
"The solidity of the economy and the rapid recovery that the economy has demonstrated in recent months have also been reflected in the recovery and stability of the financial markets."
Yaron concludes that "the Israeli economy is founded on solid and healthy economic foundations, while being a global leader in the fields of innovation and technology. We knew how to recover from difficult times in the past and quickly return to prosperity, and the Israeli economy has the strength to ensure that this will be the case this time as well."
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