Fitch Ratings Warns Israel’s Judicial Reform Could Weaken Credit Profile

Fitch Ratings, a prominent credit rating agency, has cautioned that Israel’s proposed judicial reform, which aims to limit the power of the court system, could weaken the country’s credit profile. In a report released on Wednesday, the agency warned that the reform could negatively affect governance indicators, policy outcomes, and investor sentiment. Despite this warning, Fitch maintained Israel’s rating at A+ with a stable outlook, according to a statement issued by the country’s Finance Ministry.

Fitch’s analysts explained that Israel’s rating balances a diversified, resilient, and high-value-added economy, and strong external finances, against a high government debt-to-GDP ratio. The agency predicts that Israel’s GDP growth will remain robust at 2.9% in 2023, following 6.4% in 2022, despite global challenges and monetary policy tightening that will impact private consumption and investment. Fitch attributes this growth to continued exports from the high-tech and defense industries, strong population growth, and increased government spending.

Furthermore, the report anticipates that Israel’s inflation will gradually decrease to around 3% by the end of the year, compared to 5.3% in 2022. The agency’s findings reveal a cautiously optimistic outlook for Israel’s economy, despite potential risks posed by the proposed judicial reform.