The Bank of Israel has issued a response to the downgrade of Israel’s credit rating by international rating agency Moody’s on Friday. In a statement released this morning, Governor of the Bank of Israel Amir Yaron says that, following the report by Moody’s and the decision to cut Israel’s sovereign rating from A1 to A2, action must be taken to restore confidence in the Israeli economy. "In order to strengthen the confidence of the markets and of the rating agencies in the Israeli economy, it’s important that the government and the Knesset should act to deal with the economic issues raised in the report."
Yaron’s statement stresses that he Bank of Israel has already put forward several courses of action in this respect, first and foremost the approval by the Knesset of the revised 2024 budget with all the adjustments it contains.
Yaron was one of the main people who worked vis-à-vis the rating agency to prevent the downgrade, and, in a statement released last night, Minister of Finance Bezalel Smotrich thanked him and others involved for their efforts.
Yaron further says in his statement today: "The reason for the rating cut is the lack of certainty over when and how the Swords of Iron war will end, the impact of the war on the ability of the government and the Knesset to attend to core economic and social issues, and the change in the fiscal position," while the reason for the negative rating outlook was, he said, the uncertainty over the extent to which the fighting will spread to the northern front. Yaron thus did not attribute importance to the point raised by Moody’s that ""Israel's exposure to political risks might, with high probability, continue into the foreseeable future, even if the fighting in Gaza diminishes in intensity or pauses."
Yaron’s statement concludes: "The Israeli economy is based on strong and healthy economic foundations, with world leadership in innovation and technology. We have proved capable of recovering from difficult periods in the past and rapidly returning to prosperity, and the Israeli economy has the strengths to ensure that that will be the case this time too."
Published by Globes, Israel business news - en.globes.co.il - on February 11, 2024.
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