In the second quarter: Israel’s economy contracted at annual rate of 3.5%
Israel’s economy shrank at an annual rate of 3.5% in the second quarter, according to a preliminary estimate published by the Central Bureau of Statistics (CBS) on Sunday.
This was the toughest quarter since the one at the start of the war, with CBS attributing the contraction in GDP to the war with Iran. Among other things, there was a 6.2% drop in business output and a 12.3% decline in investment in fixed assets.
About a month and a half ago, Moody’s credit rating agency decided to keep Israel’s credit rating at the lowest level it has ever been – Baa1 with a negative outlook.
The decision was met with great disappointment among senior economic officials in Jerusalem, who had expected that after the fighting with Iran and its successful outcomes, the time had come to raise the rating. This expectation stemmed from the fact that Israel’s credit rating had long been weighed down by geopolitical risks from Iran.
Moody’s did not buy the argument pushed by Israeli officials, noting that Israel’s defense spending is expected to soar, the war remains ongoing, and Israel could slip into a reality in which exchanges of blows with Iran become routine.
Based on these considerations, the rating agency concluded that growth will be weak and debt will be high. The significance of a low rating for a country whose debt amounts to hundreds of billions of shekels is that the interest rate will be higher. The increased interest costs will come at the expense of education, welfare, and healthcare –and will affect every citizen.
Kan.org.il is the Hebrew news website of the The Israeli Public Broadcasting Corporation
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