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Israel's government must take action to tackle the economic challenges raised by rating agency Moody's, which downgraded the country's credit rating last week amid the war in Gaza, its central bank chief has said.
“In order to strengthen the trust of the markets and of the ratings agencies in the Israeli economy, it is important that the government and the Knesset act to deal with the economic issues raised in the report,” Bank of Israel governor Amir Yaron said on Sunday.
Moody’s Investors Service on Friday downgraded Israel’s credit rating from A1 to A2 with a negative outlook, attributing the move to its assessment “that the continuing military conflict with Hamas, its aftermath and wider consequences materially raise political risk for Israel as well as weaken its executive and legislative institutions and its fiscal strength, for the foreseeable future”.
Israel’s public finances are also deteriorating and the country’s debt burden is expected to be materially higher than projected before the conflict, Moody's said.
The agency expects the public debt to gross domestic product ratio to peak at 67 per cent, from 60 per cent in 2022.
Before the conflict started, Moody's expected that Israel's debt burden would decline towards 55 per cent of GDP.
However, Mr Yaron stressed that the country could handle the stress due to the economy’s high potential growth and the structural surplus in the current account.
“Israel has experienced geopolitical crises in the past, when the debt to GDP ratios were much higher, and there was never any delay in repayment of government debt,” he said.
Israel's Ministry of Finance expects spending to be permanently higher by at least 1.4 per cent of GDP and potentially closer to 2 per cent of GDP if the conflict lasts longer or escalates further than currently expected.
In its baseline scenario, Moody's expects Israel's defence spending to be nearly double the level of 2022 by the end of this year and to continue to rise by at least 0.5 per cent of GDP in each of the coming years, with risks tilted towards yet higher defence spending.
The Bank of Israel estimates the cost of the conflict for the years 2023-2025 to stand at about 255 billion shekels ($64.4 billion) or 13 per cent of the GDP forecast for this year, which includes both higher defence and civilian spending as well as lower tax revenue.
Last year's budget deficit was raised from less than 2 per cent to 4.2 per cent of GDP in the supplementary budget approved in mid-December. The revised budget for this year sets a deficit of 6.6 per cent of GDP, compared with a pre-conflict forecast of about 2.5 per cent.
Israel has said it has no immediate plans to end the war raging in Gaza that began in October, which has killed more than 28,100 Palestinians.
While Israel's economy has so far managed the fallout from the war “reasonably well” with the labour force approaching pre-conflict levels, some sectors of the economy, in particular construction, are operating at much lower levels than normal, Moody's said.
There are also heightened risks of an escalation involving Hezbollah in the north of Israel, “which would have a potentially much more negative impact on the economy than currently assumed”, the agency said.
But Mr Yaron said the Israeli economy is “rooted on strong and healthy economic fundamentals”.
“We have known how to recover from difficult periods in the past and rapidly return to prosperity, and the Israeli economy has the strength to ensure that this will happen this time as well,” he said.
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Stuck in a job without a pay rise? Here's what to do
Chris Greaves, the managing director of Hays Gulf Region, says those without a pay rise for an extended period must start asking questions – both of themselves and their employer.
“First, are they happy with that or do they want more?” he says. “Job-seeking is a time-consuming, frustrating and long-winded affair so are they prepared to put themselves through that rigmarole? Before they consider that, they must ask their employer what is happening.”
Most employees bring up pay rise queries at their annual performance appraisal and find out what the company has in store for them from a career perspective.
Those with no formal appraisal system, Mr Greaves says, should ask HR or their line manager for an assessment.
“You want to find out how they value your contribution and where your job could go,” he says. “You’ve got to be brave enough to ask some questions and if you don’t like the answers then you have to develop a strategy or change jobs if you are prepared to go through the job-seeking process.”
For those that do reach the salary negotiation with their current employer, Mr Greaves says there is no point in asking for less than 5 per cent.
“However, this can only really have any chance of success if you can identify where you add value to the business (preferably you can put a monetary value on it), or you can point to a sustained contribution above the call of duty or to other achievements you think your employer will value.”
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How to join and use Abu Dhabi’s public libraries
• There are six libraries in Abu Dhabi emirate run by the Department of Culture and Tourism, including one in Al Ain and Al Dhafra.
• Libraries are free to visit and visitors can consult books, use online resources and study there. Most are open from 8am to 8pm on weekdays, closed on Fridays and have variable hours on Saturdays, except for Qasr Al Watan which is open from 10am to 8pm every day.
• In order to borrow books, visitors must join the service by providing a passport photograph, Emirates ID and a refundable deposit of Dh400. Members can borrow five books for three weeks, all of which are renewable up to two times online.
• If users do not wish to pay the fee, they can still use the library’s electronic resources for free by simply registering on the website. Once registered, a username and password is provided, allowing remote access.
• For more information visit the library network's website.
