After a minute of silence: the protests against the legal revolution are renewed (Walla system!)
Moody's credit rating agency announced today (Friday) the lowering of Israel's credit rating horizon from "positive" to "stable".
This, against the background of concern in recent days about the drop in the rating due to the effects of the proposed changes in the legal system.
We will remind you that about a month and a half ago, Moody's published a study that warns of a drop in the credit rating in the long term if the legislation continues, before the negotiation procedures at the President's residence began.
"The rating company Moody's published an announcement about changing Israel's credit rating forecast from 'positive' to 'stable' along with reconfirming the rating at the A1 level," Moody's said in a statement.
"The change in the forecast reflects a deterioration in the government in Israel, as illustrated by the recent events surrounding the government's proposal to change the country's legal system. While mass protests led the government to halt the legislation and seek a dialogue with the opposition,
They also added that as a result, the risks in Israel's rating are now balanced, which they say leads to a stable forecast.
On the other hand, Moody's notes that the risk of further political and social tensions remains.
But if they manage to reach a solution without deepening these tensions, the positive economic and fiscal trends that Moody's has identified in the past remain.
In conclusion, the rating agency praises the previous government's achievements: "Overall, recent events offset the positive developments that led Moody's to assign a positive outlook in April 2022, related to strong economic and fiscal performance and the implementation of structural reforms by the previous government."
The leaders of the legal revolution.
Prime Minister Netanyahu and Minister of Justice Levin (Photo: Knesset Spokesperson, Noam Moshkowitz, Knesset Spokesperson)
"The change in the forecast to 'stable' from 'positive' reflects the deterioration of the government in Israel, as illustrated by the recent events surrounding the government's proposal to change the country's judicial system. While mass protests led the government to suspend the legislation and conduct a dialogue with the opposition, the manner in which the government tried to implement a wide-ranging reform scope without reaching a broad consensus indicates the weakening of institutional strength and the ability to predict policy," the agency added.
"As a result, the risks to the credit rating are now balanced, which leads to a 'stable' outlook. On the negative side, while discussions about the exact form of legal reform continue, the government has reiterated its intention to change the way judges are selected. This means that the risk of further conflicts and social tensions within the country remains On the positive side, if a solution is reached without deepening these tensions, the positive economic and fiscal trends that Moody's has identified in the past will remain."
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"Dramatic consequences in the credit rating": a global rating agency warns against the legal revolution
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"The manner in which the government tried to implement a large-scale reform without reaching an agreement indicates the weakening of institutional strength."
A demonstration against the legal revolution on Kaplan Street (photo: official website, Amir Goldstein)
Israel's credit rating according to the agency has not decreased in at least the last 25 years, after rising from A3 in the late 1990s, and entering the list of countries holding an A1 rating in 2008.
Since then it has maintained a stable status, despite military operations and major economic fluctuations.
The social protest in 2011 did not lower the rating either.
In fact, the conversations of Prime Minister Binyamin Netanyahu and President Yitzhak (Boji) Herzog with senior officials of the rating agency in the last day did not help, and Moody's decided that they are lowering the forecast.
It should be noted that earlier today the Central Bureau of Statistics published the monthly consumer price index, after in recent months there has been consistent inflation of between 0.5% and 0.25% each time.
There was also an increase of half a percent this month.
This is despite the Bank of Israel's attempts to cool down the price increases by providing higher interest rates each time.
At the beginning of March, the rating agency Moody's issued an unusual warning about the apparent damage to the credit rating following the legal reform.
Nevertheless, she added that she does not intend to download it at the moment.
According to the company's review published at the time, it was determined that if the policy continues and the legal reform continues to be promoted, there may be dramatic effects on the credit rating in the long term.
However, they added, the consequences are yet to be seen in the short term.
"The proposed reforms could weaken the institutions and negatively affect its sovereign credit profile," the company claimed.
"We generally expect a highly rated government to implement major institutional reform based on broad consensus and through extensive dialogue and clear communication," they added.
The company, which previously commented on the political situation in the country when it warned of a drop in the credit rating due to the platform of "religious Zionism", claimed that it is possible that the legal changes will substantially weaken Israel's attractiveness as an investment destination, and change the perception of its economic strength.
They also added and warned about the apparent dramatic damage to the high-tech industry, which is a significant component of the country's economy and many of those who belong to it have already spent their money outside its borders.
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