Moody’s Says Israel’s Economy Has Been Weakened By ‘Very High Political Risks’

 

Moody’s Says Israel’s Economy Has Been Weakened By ‘Very High Political Risks’

Moody’s Investors Service warns of Israel’s “very high political risks that have weakened economic and fiscal strength.”

“Uncertainty over Israel’s longer-term security and economic growth prospects are much higher than is typical, with risks to the high-tech sector particularly relevant, given its important role as a driver of economic growth and significant contributor to the government’s tax take,” Moody’s says in a regular update report on the country’s credit rating. “Such negative developments would have potentially severe implications for the government’s finances and may mark a further erosion in institutional quality.”

The rating agency last year slashed Israel’s credit rating by two notches to Baa1 in light of the high geopolitical and domestic political risks the country is facing and maintained a negative outlook. In the update, Moody’s says that the negative outlook reflects the rating agency’s view that “downside risks” on Israel’s credit score persist.

As challenges to Israel’s credit profile, the rating agency cites “very high exposure to geopolitical risks, polarized political system, which weighs on governance and policy effectiveness, [and] labor-market participation of religious minorities, resulting in high-income inequality and elevated social tensions.” – The Times of Israel

Our Take: Last Friday, I discussed the dire economic situation in Israel on my new show, Geopolitics with Ghost (Fridays @ 3:00 PM EST).

Israel has never fought a war that has lasted more than several weeks, a few months at most. It is not a society that is built for wars of attrition, mainly due to its lack of natural resources, limited manufacturing sector, and reliance on imports – particularly food.

When you add in the tense political atmosphere (Netanyahu is potentially facing either a mutiny, a revolution, or a civil war) to the wartime conditions, many Israelis are leaving – if for no other reason than to avoid being drafted into the IDF. (Remind you of anywhere else?)

The combination of expatriation with military conscription has created a gap in the labor force that Colonel Macgregor and others have been warning about for months, resulting in the collapse of the Israeli middle class.

The article actually alludes to this:

“As challenges to Israel’s credit profile, the rating agency cites ‘very high exposure to geopolitical risks, polarized political system, which weighs on governance and policy effectiveness, [and] labor-market participation of religious minorities, resulting in high-income inequality and elevated social tensions.’”

Finally, you have the flight of capital, as businesses and investors are wary about doing business in Israel – either because they disapprove of the politics or simply find it too dangerous and risky. The conditions have created a maelstrom that could lead to the self-defeat of the Israeli War Machine, if Netanyahu isn't careful.

But what choice does Bibi have? He can't stop now. If he does, the show is over for him. His coalition government collapses, new elections are scheduled, and Bibi is left to fend for himself against the wolves – who have three felony indictments pending against him since 2019, and at least one of those is all but a slap-dunk prosecution. (Netanyahu is caught on recording committing the crime cited in the indictment.)

This is what we call the Pincer Move. And from the way it looks, Bibi will be forced to escalate the war on a timetable that could put him face-to-face with Trump and Putin when they meet in person in Riyadh to discuss... peace.
– GhostofBasedPatrickHenry