Smotrich calls Moody’s downgrade of Israeli credit rating ‘politicized, unreasonable’
Finance minister asserts Israeli economy strong, says rating was result of Israel not accepting ‘suicide plan’ for ceasefire and Palestinian state; Lapid, Liberman blame government
Finance Minister Bezalel Smotrich on Saturday brushed off US rating agency Moody’s downgrade of Israel’s credit rating, saying the decision linked to the Gaza war was not based on sound economic reasoning and was a pessimistic “manifesto.”
In its announcement Friday, Moody’s cited the impact of Israel’s ongoing war with Hamas in Gaza, changing the credit rating from A1 to A2, with a negative credit outlook, meaning further downgrades are possible, due to “the risk of an escalation” with Lebanese terror group Hezbollah along Israel’s northern border.
Smotrich was defiant Saturday night, saying, “The Israeli economy is strong by all measures. It is capable of sustaining all war efforts, on the front line and home front, until, with God’s help, victory is achieved.
“Moody’s announcement on the downgrade does not include serious economic arguments and is entirely a political manifesto based on a pessimistic and unfounded geopolitical worldview, which reflects a lack of confidence in Israel’s security and national resilience, as well as an apparent lack of confidence in the righteousness of its path in the face of enemies,” he added.
Smotrich griped that the firm did not define Hamas or Hezbollah as terror groups in its statement. He also complained that Moody’s said it would not have announced the downgrade if Israel had accepted what he termed the international community’s “suicide plan” to end the war and allow the creation of an “Arab terror state” in Gaza and the West Bank.
He dismissed the “New York economists handing downgrades based on whether we agree to a ceasefire or not, [and whether] we are willing to set up a Palestinian state or not,” and who have “decided to downgrade our rating because we have so far not done so.”
He called their position “absolutely unreasonable.”
Speaking to Channel 12’s “Meet the Press” on Saturday, Smotrich urged Israelis to read the report and said Moody’s actually “praised the Israeli economy” and recent economic steps it had taken.
The Israeli economy is responding “outstandingly” to the war, he claimed. The Finance Ministry has been “pleasantly surprised by the economic activity, the market… growth is rebounding.”
In a rare statement issued over Shabbat, Prime Minister Benjamin Netanyahu also played down the Moody’s decision.
“The Israeli economy is strong. The rating downgrade is not connected to the economy, it is entirely due to the fact that we are at war,” the premier said.
Opposition Leader Yair Lapid pointed a finger at what he called governmental dysfunction.
“The lowering of Israel’s credit rating is further proof that this government is not functioning and harming the public,” Lapid wrote on X.
“For over a year now, this government has abandoned growth in the economy, bringing in a wasteful and irresponsible budget, and even during a war there is not one among the 38 ministers who work for the Israeli economy,” Lapid said.
He said Smotrich’s “‘with God’s help’ and ‘money for everything’ economy has failed. Israel needs a new government that functions.”
Head of the opposition’s Yisrael Beytenu party Avigdor Liberman also slammed the government over the decision.
Liberman, who served as finance minister before the current coalition was sworn in in late 2022, said the Moody’s decision was no surprise, asserting it was “the result of populist and insufferable steps the government has advanced since its establishment.”
“The government of destruction is continuing to bring us to an economic disaster, exactly as it brought us a security disaster on October 7,” he charged.
The Yisrael Beytenu chief also hit out at the amended wartime budget being advanced through the Knesset, arguing it “harms growth.”
To pay for a defense spending increase of around NIS 70 billion ($18.6 billion), the budget includes an across-the-board cut of 3% from all government ministries with some exceptions. It also slashes around NIS 2.5 billion ($670 million) out of NIS 8 billion in coalition funds — discretionary funds earmarked for pet projects of MKs and ministers, and contains a deficit target of 6.6 percent of GDP.
Notably, the current plan does not contain any provisions for reducing the number of government departments, despite the Finance Ministry’s recommendation that 10 superfluous ministries — including the Settlements and National Missions Ministry, the Jerusalem and Jewish Tradition Ministry, and the Intelligence Ministry — be closed to cover the wartime shortfall.
The war with Hamas — which began on October 7 when the terror group led a surprise cross-border onslaught, killing some 1,200 people, the large majority of them civilians, and taking 253 people hostage — is costing Israel at least NIS 1 billion ($269 million) a day, according to media reports.
Following the attack, S&P Global Ratings lowered Israel’s credit outlook from stable to negative on risks that the conflict could broaden.
Fitch — the last of the big three US ratings agencies — placed Israel on negative watch over risks from the conflict.
