Moody's: Israeli Election Outcome Unlikely to Affect Credit Rating Immediately
Translated & summarized from Calcalist by baba
Credit rating agency Moody's stated that Israel's election results will not immediately affect its Baa1 credit rating, citing stable economic policy expectations. The agency warned that damage to judicial independence could lead to a downgrade, while improved foreign relations might boost the rating. Moody's raised Israel's growth forecast to 5% for this year, attributing it partly to statistical changes. The agency also projected a 5% deficit for 2026, with debt at 68.5% of GDP.
The story in 6 lines · by baba
- Moody's expects Israeli election results to have no immediate impact on the country's Baa1 credit rating.
- A key risk identified by Moody's is the potential weakening of Israel's judicial independence.
- Moody's raised Israel's growth forecast to 5% for the current year, citing statistical adjustments.
- The agency projects Israel's 2026 deficit at 5% of GDP and national debt at 68.5% of GDP.
- Fitch Ratings, however, views political deadlock and the budget as the primary economic risks.
- Moody's emphasizes that the next government's approach to the judiciary and foreign relations will be crucial.
Credit rating agency Moody's announced that the results of Israel's recent elections are not expected to have an immediate impact on the country's Baa1 credit rating, which currently holds a stable outlook. Moody's attributes this to the expectation that there will be no significant changes in economic and fiscal policy. The agency anticipates that forming a new government could take weeks, or possibly months.
However, Moody's identifies a primary risk stemming from the elections: a potential weakening of institutional resilience. If the incoming coalition proceeds with measures that undermine the independence of the judiciary and reduce checks on the executive branch, Moody's may downgrade its assessment of Israel's institutional strength. Conversely, a shift in policy regarding Gaza, the West Bank, Lebanon, and Iran could improve foreign relations and positively influence the credit rating.
Moody's analysts noted that a government led by Benjamin Netanyahu is likely to maintain the current approach, potentially straining foreign relations further. An alternative government, led by the opposition, might offer a different direction. The agency has raised Israel's growth forecast for the current year to 5% from 3.7%, and for 2027 to 6% from 5%. This upward revision is largely due to a statistical adjustment by the Central Bureau of Statistics, which now includes overseas production by Israeli companies.
Moody's projects the overall government deficit for 2026 to be 5% of GDP, down from 5.9% in its earlier forecast, with national debt at 68.5% of GDP, down from 70.1%. For subsequent years, the deficit is expected to be 4.8% in 2027 and 4.3% in 2028. In contrast, Fitch Ratings recently issued a review suggesting that political deadlock and the continuation budget pose the main risks to the economy, predicting a continued rise in debt. Moody's, while briefly mentioning the potential for prolonged political paralysis, focuses its assessment on institutional factors and international relations, emphasizing that the credit rating will depend on the next government's stance on the judiciary and its international engagement.
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