Israel’s economy will overcome any short-term impact from Moody’s Investors Service’s move to lower the nation’s credit outlook on concerns over a planned overhaul of the legal system, according to a senior minister.
“I would not put a short on the Israeli economy,” the country’s Economy and Industry Minister Nir Barkat said in an interview Thursday in Mumbai. “We are a strong economy,” and the nation is a “good place to invest,” he said, adding that the country would recover from this as it did in the wake of the pandemic.
Moody’s decision to cut the credit outlook to stable from positive last week was the most concrete rebuke among the three ratings agencies following the government’s proposal to curb the power of the Supreme Court to choose new judges and cancel laws approved by parliament. Until now, the planned changes only prompted warnings from Fitch Ratings and S&P Global Ratings over the country’s credit standing.
The far-right government has currently put a hold on the plan after tens of thousands of Israelis protested the proposals that critics say could hurt economic growth and undermine democracy by giving the ruling coalition too much power. Prime Minister Benjamin Netanyahu has expressed confidence that a compromise could be reached over the plan, saying Israel’s democracy and economy were resilient.
In response to whether the judicial overhaul should be shelved, the former mayor of Jerusalem and an ally of Netanyahu, Barkat said the government prefers to make the changes with wide acceptance in the country. “All of us want a better democracy. We believe in the rule of law,” he added.
Nevertheless, Bank of Israel Governor Amir Yaron warned that in a worst-case scenario, the plan could cut economic growth by as much as 2.8% annually for three years. Reflecting some of the uncertainty, the currency has weakened in recent months, but Barkat, 63, was confident that the nation would overcome these “ups and downs.”
Israel and India are working on a free trade agreement that will ease the flow of goods and services between the two nations, said Barkat, who is the first minister under the current administration to visit the South Asian country. And while India is a “top priority,” there are challenges to striking a deal quickly, he said, without elaborating.
Israel could offer technological know-how to India’s agriculture, food and defense sectors, while the South Asian nation can provide workers for construction and services, Barkat said.
As a sign of growing ties between the two countries, earlier this year billionaire Gautam Adani said he will push ahead with investments in Israel, after Adani Ports & Special Economic Zone Ltd. won a tender to buy the Haifa Port for $1.2 billion.
“The Adani group has a lot to offer,” the minister said, adding that the Indian company has expertise in operating ports. “We are too happy to see it work,” he said.