Moody downgrades Israel’s credit outlook as more civil crises loom

When the Knesset resumes after Yom Ha’atzmaut, judicial review and a new draft exemption law for Haredim will increase tensions again. 

The Israeli government’s planned judicial upheaval has – as predicted by economists, experts and protesters – been given a significant warning flag by credit rating agency Moody’s, which announced on Friday that it is downgrading the outlook for the country’s credit rating.

The credit rating agency published its detailed annual outlook on Friday. While Israel’s credit rating remains unchanged for now – at A1 – the outlook for the future, in which the company estimates which direction the rating will be heading in the foreseeable future – has been downgraded.

The move comes despite efforts by both President Isaac Herzog and Prime Minister Benjamin Netanyahu, who held talks with senior Moody’s executives, to persuade them not to lower Israel’s credit rating.

In the statement, Moody’s said: “The change of outlook to stable from positive reflects a deterioration of Israel’s governance, as illustrated by the recent events around the government’s proposal for overhauling the country’s judiciary.”

The move comes as the Netanyahu government faces a 15th straight week of protests and falls in the polls which would make National Unity’s Benny Gantz prime minister if another election were held.

Almost half of Israelis blame Netanyahu for the credit downgrade.

When the Knesset resumes after Yom Ha’atzmaut at the end of April, Netanyahu will have to decide what to do about the controversial judicial overhaul legislation, placed on pause before Pesach after massive protests, and urging from both his own defence minister and the US president.