Moody’s downgrades Israel’s outlook to negative

Moody’s downgrades Israel’s outlook to negative

Report cites economic slow down, security challenges, but notes Israel has weathered financial storms in the past

Tel Aviv (photo credit: Moshe Shai/Flash90)
Tel Aviv (photo credit: Moshe Shai/Flash90)

The Moody’s international credit ratings agency downgraded Israel’s banking system outlook on Tuesday from stable to negative, saying the move reflected a predicted economic drop-off.

The Moody’s report cited an expected slackening in Israel’s economic growth as well as the economic and security challenges facing the country as the reason for the negative rating. The report also said that there is a problem with the asset quality of Israeli banks due to a high concentration of domestic lending to large corporations.

“The negative outlook reflects the projected slowdown in economic growth and the country’s challenging operating environment which will continue over the 12-18 month outlook period,” Moody’s wrote in a press release.

The agency tempered its downgrade, though, saying Jerusalem had proven itself capable of weathering economic storms before.

“Moody’s acknowledges that Israel’s economy has proven resilient to repeated shocks in the past,” it wrote.

In February, Finance Minister Yuval Steinitz met with Moody’s representatives visiting Israel and requested they raise Israel’s credit rating, a move which Moody’s last did in 2008.

The Bank of Israel released a statement on Tuesday that it was studying the report in order to draw the appropriate conclusions regarding the Israeli banking system.

Following the release of Tuesday’s report, the Israeli social protest group Israel Yekara Lanu (Israel is dear to us) called on the new unity government to dismantle the country’s three largest banks, Israel Radio reported.

The group claims that the banks take billions of dollars entrusted to them by Israeli citizens, and use that money to provide loans to tycoons, so that they can monopolize the market. Then, the tycoons make their products more expensive to repay the debts to the banks.


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