Credit rating agency, Moody’s, downgraded Israel’s economic outlook from positive on Friday, citing the “deterioration of Israel’s governance”. The move comes despite efforts by Israeli President, Isaac Herzog, and Prime Minister, Benjamin Netanyahu, to persuade the New York based agency not to lower Israel’s credit rating. Both are said to have held unsuccessful talks with senior Moody’s executives.
The agency said the decision to downgrade its outlook was due to “a deterioration of Israel’s governance”. According to Reuters, much of Moody’s report focused on a government plan to overhaul Israel’s court systems and, in doing so, give politicians greater sway over selecting judges and limit the power of the Supreme Court to strike down legislation. The planned overhaul sparked protests across Israel, forcing Netanyahu to delay the decision.
Businesses have also reacted. Israel tech firm, Riskified, announced that it would transfer $500 million to foreign banks, fearing that Israel is heading into a state of uncertainty. Several other tech investors followed. According to Ynet News, around $4 billion has been transferred out of Israel to foreign banks.
In its report explaining the decision to downgrade Israel, Moody’s said: “While mass protests have led the government to pause the legislation and seek dialogue with the opposition, the manner in which the government has attempted to implement a wide-ranging reform without seeking broad consensus points to a weakening of institutional strength and policy predictability.”
Moody’s warned that Israel’s credit ratings could also come “under downward pressure if the current tensions were to turn into a prolonged political and social crisis with material negative impact on the economy, possibly linked to substantially lower capital inflows into the important high-tech sector and relocation of Israeli firms abroad.”
Israel’s downgrade comes only a year after the occupation state was upgraded by the ratings agency. Besides the judicial overhaul, Israel is facing several hurdles which, in the long term, could negatively impact its economy. A consensus is growing over Israel’s practice of apartheid, which is a crime against humanity. The latest to add its weight behind the claim is the prestigious American magazine, Foreign Affairs, widely considered one of most influential foreign policy magazines shaping Washington’s thinking.
Global consensus around South Africa’s practice of apartheid triggered a global campaign to boycott and divestment from the country. A similar movement has galvanised around the world to end Israel’s apartheid system. The occupation state, aided by allies in the West, has taken unprecedented steps that are not in line with the democratic values they claim to uphold, to supress a comparable Boycott Divestment and Sanctions (BDS) movement from snowballing, including legislation to ban freedoms of expression.