In response to the decision of international rating agency Moody’s to lower Israel’s sovereign credit rating for the first time in history, Finance Minister Bezalel Smotrich has criticized the move as a political one. He emphasized that the Israeli economy is strong and has the resources to support the war effort and return to rapid economic growth.
Smotrich argued that Moody’s decision was based on a pessimistic and unfounded worldview and reflected a lack of faith in the sustainability and viability of Israel. He also criticized the agency for not recognizing terrorist organizations like Hamas and Hezbollah and for hinting that it would not have lowered the rating if Israel had accepted a proposal to stop hostilities and create a Palestinian state.
Despite expressing gratitude to other Israeli economists, Smotrich questioned the authority of a few economists in New York to assess the situation in Israel. Meanwhile, Moody’s report expressed concern about the consequences of the ongoing War of Iron Swords, military escalation on the Lebanese-Israeli border, instability of current Israeli government, strength of civil society, negative outlook on Israel’s credit rating, which may lead to possible downgrade in future.
The downgrade was attributed to full-scale conflict with Hezbollah, potential damage to Israeli infrastructure, weakening of public institutions which may lead to decrease in ratings. However, Moody’s report indicated that if government showed effectiveness in formulating policies that support economic growth and restore security after end of hostilities, outlook would be changed to neutral.