Former central bank governor says Moody’s downgrade is a ‘mega event with long-term consequences’

Former Bank of Israel governor Jacob Frenkel says Moody’s downgrade of Israel’s credit rating is a “dramatic mega event with long-term consequences.”

Speaking to Channel 12, Frenkel says such a downgrade has “never happened” and Israel has over the years “fought to improve the rating.”

He dismissed Israeli officials’ reaction to the downgrade overnight Friday-Saturday as politically motivated and says “it was no surprise, the writing was on the wall, they gave us enough warnings, but, like in other areas [of life] in Israel unfortunately, the warnings were ignored.”

Finance Minister Bezalel Smotrich said yesterday that the report downgrading Israel’s credit rating amounted to a “political manifesto,” maintaining that the decision was linked to the Gaza war and was not based on sound economic reasoning.

“We’ve had a lot of wars, and we’ve had a lot of shocks like COVID-19, the credit rating never went down,” says Frenkel, who served as the central bank governor from 1991 to 2000 and won the Israel Prize in Economics in 2002.

“The problem here is that the leadership did not prepare adequately to address a shock of this kind. They think it’s ‘just a war’… We have to understand its also an economic event of the first order. It will have consequences on every resident.”

“We can’t ignore this. We need to take steps to build trust. The brand that is called ‘Israel’ has been harmed,” he says.