According to a report published by the American newspaper “Washington Post”, and viewed by “Iqtisad Sky News Arabia”,: Israeli economy He became in “extreme danger” as the war expanded and escalated Costs of military operationsespecially after tens of thousands were closed Israeli companies Its doors, while reservists struggle to reconcile their careers with military service.
And I paid War which Israel is waging against Hamas and Hezbollah, agency “Moody’sTo lower the country’s credit rating for the second time this year, the agency moved Israel’s rating from A2 to Baa1, a significant drop of two notches, while keeping the outlook negative.
This reduction raises concerns about Israel’s ability to manage its finances and maintain… Economic stability In light of the continuing war with Hamas and Lebanese Hezbollah, the absence of any horizon for a ceasefire in Gaza, and the expansion of the possibilities of an Israeli invasion of Lebanon by land.
Sharp revision of growth forecasts
“I expressed”Moody’s“Also expressed doubts about Israel’s ability to return to Economic growthas happened after previous conflicts. The agency now expects the Israeli economy to grow by just 0.5 percent in 2024, a sharp revision from the previous growth forecast of 4 percent.
In addition to the economic impacts, Moody’s highlighted governance concerns Israeli government And the strength of its institutions. The agency stated that internal political tensions, along with the ongoing conflict, have increased pressure on Israel’s ability to implement effective policies to achieve Economic stability.
The Washington Post report says that Israel witnessed Shrinkage A sharp decline in its gross domestic product, as tens of thousands of businesses were closed Companies Its doors, and an increasing number of Jobs abroad, while Israeli reserve soldiers either halted their careers after being called to serve, or struggled to reconcile this life with military service.
About 287,000 Israelis were called up to serve in the army after the events of October 7, 2023, a huge number in a country with a population of less than 10 million. Many of them were embedded in their companies and had difficulty balancing their professional goals with front-line duties.
Repercussions in most sectors
While it remained an industry Technology Israel’s huge superstructure is holding up, but the construction and agricultural industries that relied heavily on Palestinians, whose work permits Israel revoked after October 7, have been hit hard, while June data from Israel’s Central Bureau of Statistics showed that tourism in the country It fell by more than 75 percent, forcing the closure of many storefronts on normally busy streets in Jerusalem’s Old City.
On the other hand, Israel has seen defense spending double, with a caveat Central Bank The war could cost $67 billion until 2025, a forecast made before the recent Israeli escalation in Lebanon.
The mother of all wars
According to Israeli economist Dan Ben David, who heads the Shoresh Foundation for Social and Economic Research, Economy of Israel In serious danger unless the government wakes up.
He added: “Right now, they are completely disconnected from anything that is not related to the war… and there is no end in sight.”
In referring to the war as “The mother of all warsBen David expressed his frustration with officials in the Finance Ministry, currently headed by Minister Bezalel Smotrich, over what they see as the government’s preference to appease its supporters at the expense of strengthening the economy.
In this context, a researcher at the Center for Global Development pointed out that the Israeli economy usually shows flexibility during wars, but this war seems to be the mother of all wars, stressing that this situation is costly, and that the money must come from somewhere.
The risk of downgrading the rating for the second time
The consequences of Moody’s downgrading Israel’s credit rating to… Baa1 Very dangerous, as this step is expected to hamper Israeli economic activity and lead to a sharp deterioration in levels Living.
This step will contribute to a decline Investor confidencewhether local or foreign, which will cause a sharp decline in investments, which are considered the main engine of economic growth and creation Job opportunities.
On the other hand, it will lead to higher costs Borrowing To increase the financial burden on Companies And individuals, which will limit their ability to invest and spend, and thus hinder the rotation of the wheel of the economy.
In the long term, the deterioration of confidence in the Israeli economy will lead to capital flight and a decline in the value of the shekel, which will exacerbate inflation and further exacerbate the living crisis. Therefore, these complex dynamics pose a serious threat to economic and social stability.
What is Baa1 rating?
The new credit rating provided by Moody’s for Israel means weak creditworthiness and high risks surrounding the economy and public finances.
In other words, any new debt instruments issued by the state will not be attractive to investors from countries And companies.
And in 2024, she expects Israeli Ministry of Finance The budget deficit will reach about 6.6 percent of the gross domestic product, i.e. more than 34 billion US dollars, which is a deficit that will be covered through borrowing and issuing… Bonds And permissions.
Here, Israel will face another journey in search of maximizing financial revenues, to confront the high cost of debt owed to it, and raising taxes is one of the tools for increasing these revenues.
According to Moody’s estimates on Friday, Israel is heading for an increase Public debt of GDP to 70 percent by 2025, at a time when the agency’s expectations in mid-2023 indicated reducing the percentage to 50 percent.
Equivalent ratio Religion The Israeli share of 70 percent of the gross domestic product is worth $370 billion, a number that exceeds Israel’s oil reserves. Foreign exchangeamounting to approximately $200 billion, according to data from the Bank of Israel.
