Credit rating agency Moody's warned on Tuesday that if the proposed judicial reforms are passed by Israel's government, the country's credit rating outlook may be downgraded from positive to stable and its ability to attract investment could be damaged.
“If implemented in full, the proposed changes could materially weaken the strength of the judiciary and as such be credit negative,” the agency said in a report. “The planned changes could also pose longer-term risks for Israel's economic prospects, particularly capital inflows into the important high-tech sector.”
Furthermore, while the agency said it doesn't expect the reforms to have any short-term economic impact, it cited reports in Israeli media that some tech companies are considering leaving the country as a sign of a potential problem facing the economy.
“While those announcements are probably rather symbolic at this stage, there is a risk that new Israeli companies will choose to locate elsewhere rather than in Israel,” it said.
Moody's gave Israel an A1 credit rating in an assessment last April, indicating it has a high probability of meeting its fiscal obligations, according to Al-Monitor.
“We continue to believe that there is broad political consensus on the direction of economic and fiscal policies despite the fragmented political landscape. However, stronger fiscal and debt metrics may not be sufficient to offset weakening institutions if the content of the judicial reforms and the way they are passed point to such weakening.”Moody's
“We continue to believe that there is broad political consensus on the direction of economic and fiscal policies despite the fragmented political landscape,” Moody's said. “However, stronger fiscal and debt metrics may not be sufficient to offset weakening institutions if the content of the judicial reforms and the way they are passed point to such weakening.”
Economic benefits of Abraham Accords may be stymied by West Bank violence - Moody's
The Moody's report added that the positive economic effects of the Abraham Accords may be limited by a recent escalation of violence between Israelis and Palestinians in the West Bank. It suggested that Bahrain and the United Arab Emirates, in particular, may be hesitant to expand relations with Israel and Saudi Arabia may become less inclined to normalize relations.
The report added that despite the potential negative economic ramifications of the violence, Israel's economy has demonstrated a “strong resilience to external and internal security threats.”