The collapse of Prime Minister Benjamin Netanyahu’s government and early elections are a “negative” for Israel’s credit rating, Moody’s Investors Services said in a report Monday.
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“The political turbulence is credit negative because it creates policy uncertainty, weighing on economic sentiment, curbing investment and dampening economic activity,” Moody’s said, although it retained Israel’s rating of A1 Stable. Analysts Rebecca Karnovitz and Pamela Reyes Herrera said the Knesset’s failure to pass the 2015 budget before it dispersed would leave Israel with a smaller deficit and lower national debt in 2015.
“Although positive in that sense, it is more emblematic of an accident than emblematic of good fiscal policy management,” the report said. Moody’s warned that elections would encourage politicians to promise costly tax breaks and spending increases.
It did, however, concede that Israel’s fiscal management has been “effective” in recent years despite what it said was an increasingly unstable political system.