Ratings agency Moody’s late last month gave Israel’s rating “a step or two too far” and was “very conservative,” senior officials from the Ministry of Finance’s General Accounting Department told The Jerusalem Post.
“We respect Moody’s and the government should listen carefully and address relevant comments. However, in our professional position, at least Moody’s has taken the following steps.” [it] “We’ve gone one step too far at this point,” they said.
The downgrade resulted in Israel being downgraded two notches from A2 to Baa1 (the lowest score in the country’s history), and the rating outlook remained negative.
“The main part of what a credit rating should represent is that […] It is the country’s ability to repay its foreign currency debt,” the official explained, adding that Israel’s “foreign currency repayment capacity is very strong.”
Officials said Israel has had a current account surplus of more than 5% for 20 years, which is “quite structural” as the country typically exports more than it imports. he added. Moody’s sign on the 7th World Trade Center Tower, photographed on August 2, 2011 in New York. (Credit: REUTERS/MIKE SEGAR)
He added that the Bank of Israel holds “the highest foreign exchange reserves in history,” equivalent to almost four times its external debt, demonstrating Israel’s strong ability to service its external debt.
Officials said senior economists believe Moody’s in some sense treated the “worst-case scenario” as a “primary scenario.”
This means that they assumed that the country’s economic recovery would be very long and that the debt-to-GDP ratio would increase significantly.
Officials believe the scenario is ‘exaggerated’
While this scenario is legitimate, “we believe it is overstated,” officials told The Jerusalem Post, adding that they believe it is premature to make assumptions in Moody’s base case. He added that
“As long as we have an adequate and responsible budget aimed at growth here and the security situation improves, we can expect a faster economic recovery.”
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Professor Dan Ben-David of Tel Aviv University, director of the Shoash Institute for Social and Economic Research, emphasized the uncertainty surrounding the Israeli economy, despite the confidence projected by Treasury officials.
“Take a quick look at last week’s major revisions [Israel’s] The third downward revision of GDP by the Central Statistics Office gives us a pretty good idea of how much we actually know about the true severity of the situation, which is continually being revised downward. he said.
“It’s mid-October and the government has just started considering next year’s budget while the Finance Minister is MIA. It may seem unbelievable given his comments and focus areas, but perhaps it is It’s going to be for the better, given the gravity of this moment we’re in right now. ”
Earlier this month, the Governor of the Bank of Israel, Professor Amir Yaron, emphasized the importance of Moody’s ratings, which may have an impact on Israel, regardless of whether they are premature or exaggerated.
“It is important to pay attention to and take the ratings agencies’ assessments seriously because they reflect the challenges and risks facing the Israeli economy as seen by the world,” Yaron explained.
