Moody’s Investors Service (Moody’s) – the internationally renowned credit ratings agency – predicted that the inflation rate in Israel will go up to as much as 6.8% in 2024. And Moody’ also predicts that Israel will see a growth in GDP of just 1.4%, reported Globes.
Moreover, Moody’s also predicted that Israel’s fiscal deficit could reach 3.5% of GDP by the end of this year. And in even worse news, the firm sees it possibly hitting 7.8% of GDP in 2024.
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This assessment stands in stark contradiction to the forecasts made about the state of Israel’s economy in the near future made by the Bank of Israel recently when it announced that it would not raise interest rates. The Bank of Israel, at that time, said that it saw an inflation rate of just 2.5% in 2024 and forecast a 2.8% growth in Israel’s GDP.
Both Moody’s and the Bank of Israel made their respective predictions and assessments about the Israeli economy based on the same information. For example, in the few weeks after the attack, the Israeli Shekel dropped by 6% in value against the US Dollar and is now trading below the four to the Dollar mark for the first time in eight years. And it is expected to go lower.
A low Shekel will mean a jump in inflation in Israel because all imports will cost more.
This news comes just a week after Moody’s placed the Government of Israel’s A1 long-term foreign-currency and local-currency issuer ratings on review for downgrade. This was a direct result of the war going on in Gaza.
At that time Moody’s also placed on review for downgrading Israel’s A1 foreign-currency and local-currency senior unsecured ratings and its (P)A1 foreign-currency senior unsecured shelf and senior unsecured MTN program ratings.
And that decision by Moody’s came just days after another international credit ratings agency, Fitch, placed Israel’s A+ long-term foreign and local currency Issuer Default Ratings (IDR) on Rating Watch Negative (RWN), which means the firm is warning investors to be prepared for the possibility of trouble ahead for Israel.
Fitch also placed the short term foreign and local currency IDRs of F1+ and the issue ratings of A+ on Israel’s long term foreign currency senior unsecured bonds have also been placed on RWN.
And Israel is not the only nation that stands to lose a great deal for every day that the war in Gaza continues. Financial observers expect a prolonged conflict to cost world economies trillions.
