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Moody’s credit rating agency warns Israel’s economic outlook could be negatively impacted by judicial overhaul

A sign outside the Moody's Corporation headquarters in Manhattan, New York, Nov. 12, 2021. (Photo: REUTERS/Andrew Kelly/File Photo)

One of the world’s largest international credit-rating agencies, Moody’s, reportedly warned on Tuesday that Israel’s planned judicial overhaul could have a negative effect on the Israeli economy, such as fueling currency volatility and economic uncertainty, thus hurting investments.

The “proposed judicial overhaul could lead to weaker checks and balances with negative implications for the country’s institutions and governance strength,” Moody’s rating agency stated. “If implemented in full, the proposed changes could materially weaken the strength of the judiciary and, as such, be credit negative. The planned changes could also pose longer-term risks for Israel’s economic prospects, particularly capital inflows into the important high-tech sector.”

Moody’s implicitly criticized the high speed with which Israel’s government is pushing ahead with the judicial overhaul.

“We typically expect a highly-rated government would implement major institutional reforms on the basis of broad consensus and through extensive dialogue,” the Moody’s report said. “The scale of the changes and the speed with which the government attempts to push them through parliament have led to widespread criticism from civil society groups, opposition politicians and the international community."

"Israel has seen continued large-scale protests since January 2023," the statement read. "It remains to be seen whether the proposed changes will be implemented in their current form or whether some sort of compromise will be reached.”

According to Israel’s Channel 12 news, government officials had been trying to convince Moody’s in recent days that the judicial overhaul will not have a negative impact on the Israeli economy.

Last week, another agency, Fitch Ratings, while confirming Israel’s A+ credit rating, cautioned that the judicial overhaul could have a “negative impact” on Israel’s credit profile and lead to “worse policy outcomes or sustained negative investor sentiment.”

The All Israel News Staff is a team of journalists in Israel.

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