Israel’s Credit Rating Just Nosedived To Junk Status!

Right, so Israel’s economy. Its taken a beating as Netanyahu spends more money than he has sense – perhaps not saying a great deal – on weapons from abroad, chiefly the US. While it spends US public money as well on the same things, because the likes of Joe Biden and Antony Blinken have been essentially writing the blue and white state blank cheques it seems, billions of dollars spent to fund the atrocities we’ve borne witness to in Gaza and Lebanon and elsewhere besides.
It takes a toll and after having had their creditworthiness slide already, they’ve seen it downgrade again now, with Moody’s, the bond credit reference agency downgrading Israel’s economy to just three notches within the realms of still being a place worthy of investment still, yet given so much of Israeli investment plans have fallen through since the night of October 7th, this seems purely academic when we’re talking varying degrees of junk status here. Should the conflict between Israel and Lebanon break out into full scale war however, the warning is that Israel’s credit rating will fall further, and if it’s junk now, what would you call that?
Right, so Israel’s economy. It has nosedived over the past several months and it’s taken another dip now as Moody’s downgrade their creditworthiness down even further. Without a strong economy Israel cannot keep up its aggression towards the likes of Gaza or Lebanon, at least not without the US handing ever larger and more inexcusable packages of cash to keep it up, hardly the actions of honest peace brokers, but I don’t believe the US administration is.
A Reuters excerpt on this downgrade reads:
‘The downgrade kept Israel's rating three notches into investment grade. However, Moody's warned that uncertainties over the country's security and its longer-term economic growth prospects "are much higher than is typical at the Baa rating level." A drop below that level would mean Israel would lose its investment grade rating.
"The ratings would likely be downgraded further, potentially by multiple notches, if the current heightened tensions with Hezbollah turned into a full-scale conflict," Moody's said.
Typically, a loss of investment grade rating means a spike in the cost of servicing debt, and it could force some investors to sell their holdings - further pressuring lower the market price of Israel's bonds.
Rating agency Fitch downgraded Israel's credit rating to "A" from "A-plus" last month, and kept the rating outlook negative.’
Now some of you might be listening to this and think well Israel are being attacked too that in and of itself is going to have an impact and as much as I’d argue that is self inflicted, it does play a part, those opposed to Israel’s genocide know how Israel’s economy functions and how to hurt it.
Israel’s economy is almost entirely reliant on sea trade. It does not have good relations with it’s neighbours, that it might more readily trade with, a massive understatement I know as I’m sure you can imagine, with all the fronts Israel is currently engaged in conflict with, from Syria, to Lebanon, to Gaza and the West Bank to Yemen and more. Israel therefore relies on import and export further afield to get by, it is exactly why the Houthi blockades of shipping in the Red Sea have been so damaging to Israel, since it is driving the cost of imports from half the world through the roof.
I know people who want to avoid buying Israeli produce for example are also engaging in BDS, Boycott, Divestment & Sanctions, but by a long shot, these are not the most damaging issues Israel is facing financially. So as good as Netanyahu is at spending Israel’s money on arms, where is it losing it exactly? Why is their economy tanking to the level it is that it has now had it’s credentials as an investment opportunity tank again?
Certainly part of this issue is to do with who exactly wants to invest in Israel any more right now?
Well it’s a good point to make, it’s painting a massive target on itself, risking it all to try and drag the west into a much wider conflict, so it’d hardly be much of a surprise I don’t expect if I told you that foreign investment was down 60% in Israel now a dropping. Probably not given the last 11 months, but if I told you that stat came out a full month before the events of October 7th, would that surprise you? Well quite possibly and considering we’ve now had not one but two downgrades in Israel’s credit ratings by two credit ratings agencies now, how much worse than this have things now become?
Investment collapse is a story that predates the invasion of Gaza by Israel and all the death and destruction that has been reaped, where investments dropped by a third on the previous year and sales of start up businesses in Israel to foreign investors also plummeted. The fact is, Israel haven’t been a safe investment for a while.
Another aspect to this is the investment of ordinary Israelis and the fact so many of them have been moving their financial assets out of the country. Pensions, insurance funds, savings are all being shifted all of the time because people living in Israel don’t want their finances tied to the fate of their own nation. So much of this has gone on that it had a weird effect on the economy in Israel by actually stabilising it for a while. All of a sudden funds that ended up being invested in foreign stocks and bonds as the likes of pensions and other investments are, ended up generating a profit for Israel in foreign currency. That bubble burst very quickly though and that was down to the biggest Boycott, Divestment & Sanctions action we’ve seen.
Tourism is another big business for Israel and it has dried up, not helped by flights from various airlines being suspended to Israel in light of attacks utilising Israeli airspace coming from Lebanon and the Houthis in Yemen for the most part. This is the holy land for three world religions after all, it’s a huge thing for Israel and for the Occupied Palestinian Territories too, with Israel bringing in some $8.46bn a year and Palestine around $1bn a year in tourism revenue. All faltering, all a direct consequence of Netanyahu’s ongoing actions.
Israel did up until a month or two ago actually have some good signs in it’s economy, but even these have now soured. Israel does produce a lot of it’s own arms, so surprise, surprise, Israeli arms manufacturers have been doing a great turn, but this is the state purchasing from these companies, so there’s no economic gain here.
Where there was an economic gain was the Israeli tech industry, a rapidly growing sector for Israel, though it has to be said, this was mostly as a result of small start ups trying to get themselves noticed and hope that a foreign corporation might pick their business up and give them a way out of Israel. One example was Google recently showing interest in purchasing the cyber security company Wiz, which was founded by former IDF cyber security officers, the sale of which would enable them to leave Israel. Not exactly a shining recommendation for anybody wishing to do business in Israel is it?
All that of course is now almost certainly flatlining, since Israel decided to hide explosives in electronics, inside tech. Now who will trust Israeli technology? After hacking Beirut airport the other day, who will trust Israeli cybersecurity? They just keep doing untold damage to themselves with Netanyahu in charge, all he cares about is war and more war and getting more nations involved on his side in his wars.
It's the governance of Israel that is copping the blame even in a news outlet as generally supportive of Netanyahu as the right wing Jerusalem Post, but there was no hiding the fact he’s the problem as this excerpt shows:
‘The agency [Moody’s] said that Israel's economy will be "more durably weakened by the military conflict than expected earlier," adding that they "no longer expect a swift and strong economic recovery as in previous conflicts."
The agency also addressed Israel's political institutions and governance, saying that "the significant escalation in geopolitical risk also points to diminished quality of Israel's institutions and governance, which have not fully mitigated actions detrimental to the sovereign's credit metrics."
Israel has been undergoing serious financial stress as a result of the war, which led to the government having to issue at least two emergency budgets for 2024.
Some experts have estimated that the war will cost a total of 10% of Israel's GDP, most of which will be paid for through borrowing.
Moody's rating downgrade will harm Israel's ability to borrow, increasing the cost of servicing debt and increasing the interest rate on new loans.’
Netanyahu seems determined to drive his nation finances into the floor as a cost he’s prepared to make in order to expand his war, keep his own backside in power, which is all any of this ultimately amounts to and his decisions will become more inexplicable the more desperate he becomes. Economic collapse might be how all of this ends. A failed state that the west was determined was not allowed to fail when they in fact are throwing money at it to fund it’s own eventual destruction. If that isn’t the stupidest investment of all I don’t know what is.
The question of how much wider the war becomes before that might happen though might get answered soon as the consequences of Israel’s assassination of Hezbollah leader Hassan Nasrallah are already being felt. Get the details of that story in this video recommendation here as your suggested next watch and I’ll hopefully catch you on the next vid. Cheers folks.