S&P Warns of Escalating Political Conflict and Economic Impact Following Coup's Fallout

Credit rating agency Moody's released a report on Tuesday detailing developments in Israel's political landscape and their potential impact on the country's economy. The report raises alarm about the ongoing demonstrations and protests surrounding the coup d'état and highlights the risk of a constitutional crisis due to petitions against the bill submitted to the Supreme Court.

Of significant concern is the threat posed by a large number of reservists, including elite pilots, who have vowed to stop reporting if the controversial bill is accepted. This has raised fears among army officials that Israel's security could be endangered, especially amid renewed violence with the Palestinians.

Moody's also points out economic repercussions resulting from the proposed reforms, with investments in Israeli high-tech companies experiencing a substantial drop. The sector raised a mere $3.7 billion in the first half of the year, the lowest figure since 2019, indicating a potential disconnection from global trends.

Following Moody's scathing report on the economic repercussions of the recent coup d'état in Israel, Standard & Poor's (S&P), another leading credit rating company, has released its own findings, shedding light on the potential consequences of ongoing political unrest in the nation.

S&P's team of economists has cautioned that if the government and opposition fail to reach a consensus on critical issues, it could lead to a further exacerbation of internal political conflict, thus imposing a burden on economic growth in the medium term. The credit rating agency has expressed concerns over the implications of continued political polarization following the approval of the first part of the announced legal reform by the parliament.

The report highlights that internal political divisions are likely to remain high in Israel, and the adoption of the remaining parts of the legal reform remains uncertain. This unpredictability poses risks to the country's economic stability and may impede the government's efforts to steer the economy on a steady path.

The aftermath of the coup has triggered widespread anxiety among investors and international observers, as the nation grapples with internal strife while trying to pave a way forward for its economic recovery.

S&P's report underscores the importance of constructive dialogue and collaboration between the government and opposition to address the pressing issues at hand and stabilize the economy. Failure to find common ground could lead to prolonged political turmoil, negatively impacting investor confidence and further hindering economic progress.

While the situation remains fluid, analysts, policymakers, and citizens alike are closely monitoring developments in Israel, hoping for a resolution that will pave the way for a stable political climate and a strong economic future.

About Standard & Poor's: Standard & Poor's (S&P) is one of the world's most prominent credit rating agencies, providing valuable insights into the financial health of various entities, including governments and corporations. Its assessments are widely regarded as influential indicators of economic stability and investment risk.

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The credit rating agency's report implicitly hints at the possibility of downgrading Israel's credit rating, but it more explicitly emphasizes the risk of lowering the country's growth forecast. Moody's had initially planned to release the report later in the day, but due to speculation regarding a possible downgrade, they decided to bring forward the publication.