Israeli credit rating holds strong

S&P affirmed its Aa-/A-1+ credit rating and stable outlook for the country.

By Erin Viner

“Israel’s positive rating has been left unchanged in a challenging period for the global economy. It is an expression of confidence in the correct economic policy that we are leading,” said Israeli Prime Minister Benjamin Netanyahu in a joint statement with Finance Minister Bezalel Smotrich.

He went on to assert that his government “will soon pass the state budget in the Knesset in order to ensure our continued efforts to strengthen the economy and fight the cost of living for the benefit of the citizens of Israel.”

S&P Global Ratings (previously Standard & Poor’s) is an internationally-recognized agency that issues credit ratings for public and private companies, governments and governmental entities.

S&P said on Friday it expected domestic tensions to ease and a consensus to be reached. But the present uncertainty, it said, may weigh on growth, which it forecast at 1.5% for 2023.

The rating came despite previous warnings to Israel that fallout from the government’s contested judicial overhaul could hamper growth.

After plans by his ruling coalition to limit Supreme Court powers sparked unprecedented protests in Israel, displeased Western allies and prompted dire economic warnings, Netanyahu in late March suspended the judicial overhaul.

Instead, he is negotiating an agreed legal reform with the opposition, in discussions that have so far shown little sign of real progress.

“If the announced judicial system changes set a trend for a weakening Israel’s institutional arrangements and existing checks and balances this could in the future present downside risks to the ratings. But we are not there yet,” S&P Global Ratings director Maxim Rybnikov said back in January.

Last month the Moody’s credit ratings agency downgraded its outlook for Israel, citing the judicial overhaul.

Israeli Justice Minister Yariv Levin introduced the sweeping “reform of governance”  on 4 January – just days after Netanyahu’s new coalition was sworn into office – to limit Supreme Court rulings against government moves and Knesset laws while increasing politicians’ input over nominations to the bench. At the time, Levin said he had been been working on the initiative for two decades, to ‘restore power to elected officials’ away from those he and his supporters consider to be overly-interventionist and left-wing judges; thus enabling the government to surpass rulings by the Supreme Court, gain control over judicial appointments and forego previous mandates to consult legal advisers appointed by the nation’s attorney general.

The nation has been gripped by unprecedented nationwide demonstrations against the deeply divisive plan over the past 16 weeks since its unveiling.

The court’s defenders say it plays a vital role in holding the government to account in a country that has no formal constitution, and that the government’s overhaul would weaken a system of judicial checks and balances, endanger civil liberties and harm the economy.

The proposal has drawn fierce condemnation from the nation’s citizens, Opposition Members of Knesset (MKs), legal officials, military reservists and advocacy groups – further broadening already deep political divisions in Israeli society amounting to what has been described as Israel’s worst-ever crisis.

Many critics allege the judicial reform is a ‘power grab’ that would concentrate authority in the hands of the prime minister and his extremist allies. They also say that Netanyahu has a conflict of interest in trying to reshape the nation’s legal system at a time when he is on trial on corruption charges, which he denies.

Prime Minister Netanyahu has dismissed the protests as refusal by leftist adversaries to accept the results of the 1 November’s election, when his Likud party and several smaller religious and hard-right nationalist factions captured a majority of 64 seats in the 120-member Knesset. They formed Israel’s subsequent 37th government, one of the most right-wing in the nation’s history. Netanyahu has ardently defended the judicial overhaul as the ‘will of the people.’

Despite Netanyahu’s pause on advancing the legislation to allow for compromise negotiations, anti-reform protests have persisteddisrupting last month’s national observance of Memorial and Independence Days.

Thousands even marched in opposition to the plan this past Saturday for the 19th consecutive week, despite concern over rocket attacks from Gaza on what became the final day of Operation Shield and Arrow.