Rating downgrade of Israel slammed

TEL AVIV, Israel — Israel’s finance minister on Sunday slammed the decision by financial ratings agency Moody’s to downgrade Israel’s credit rating, saying the announcement is a “political manifesto” that “did not include serious economic claims.”

Moody’s dropped the rating on Israel’s debt on Friday, warning that the ongoing war in Gaza and a possible war in the north with Hezbollah could adversely affect Israel’s economy.

It is the first time Moody’s has lowered Israel’s credit rating, which is used by investors to measure the riskiness of investing in a global entity or government. Moody’s downgraded Israel from A1 to A2 and said the outlook for the country’s economy was “negative.” The A2 rating nonetheless continues to carry relatively low risk, according to Moody’s.

Finance Minister Bezalel Smotrich angrily dismissed the decision. The announcement “reflects a lack of confidence in Israel’s security and national strength, and also a lack of confidence in the righteousness of Israel’s path against its enemies,” he said in a statement from his office.

Prime Minister Benjamin Netanyahu said on Saturday that Israel’s economy was strong and “the downgrade is entirely due to the fact that we are at war.” He vowed that once the war ended, the rating would go up once again.

Still, Israeli officials fear that the Moody’s downgrade could lead other major agencies also to downgrade Israel’s outlook.

That could affect Israel’s economy because it will make it harder for the government to raise money by selling bonds, said Michel Strawczynski, a professor of economics at the Hebrew University in Jerusalem and the former director of the research department at the Bank of Israel.

“If the war is long, it will have an impact, but if it’s not too long, the impact will be much less,” he said.