Netanyahu’s economics guru swats away Moody’s sting

Prime Minister Benjamin Netanyahu’s chief economic adviser Avi Simhon says markets have mostly shrugged off a ratings downgrade by Moody’s over the weekend.

“The fact that the markets did not react to Moody’s announcement – maybe it’s a lack of confidence. It shows the markets do not pay much attention to what Moody’s says,” Simhon, director of the National Economic Council in the Prime Minister’s Office, tells Reuters.

The shekel currency now stands at 3.66 per dollar versus 3.68 before the ratings action, in which Moody’s kept its outlook at negative to imply a further cut. The main Tel Aviv 125 index is up 1% this week, while government bond prices are largely flat.

Simhon describes an increased debt burden and budget deficit at 6.6 percent of the gross domestic product as blips that will not weigh down Israel’s financial strength in the long run.

“The deteriorating public finances are not something fundamental. It’s a temporary thing,” Simhon says. “We have a war and we have to finance it. It costs a lot but we can manage it without even probably going above 70% [debt to GDP ratio].”

He notes that the debt burden should start to decline in 2025 or 2026 and move back to around 60%, where it was in 2022, a few years later, given rapid economic growth.

He predicted that Israel could keep the deficit below 6.6% unless war in the north broke out, which would send it higher, but it would still be below the 12% deficit Israel carried during the coronavirus pandemic.