Moody’s said in an analysis published on Sunday that the outcome of Israel’s elections is unlikely to have an immediate impact on the country’s credit rating, which currently stands at Baa1 with a stable outlook. The agency does not anticipate an immediate change in economic or fiscal policy, and estimates that negotiations to form a new government could take weeks or even months.
According to Moody’s, the main election-related risk is a potential weakening of Israel’s institutional strength. If the incoming coalition continues to pursue measures that undermine the independence of the judiciary and weaken checks on executive power, the agency could lower its assessment of the country’s institutional strength. A change in policy toward Gaza, Judea and Samaria, Lebanon and Iran, on the other hand, could help improve Israel’s foreign relations and ultimately support its credit rating.
Moody’s analysts suggest that a government led by Benjamin Netanyahu would likely maintain the current approach, potentially putting further strain on relations with other countries. An alternative government led by the opposition, they say, could bring a change in direction. Moody’s has raised its growth forecast for Israel to 5% this year, up from 3.7%, and to 6% in 2027, compared with its previous estimate of 5%.
The agency said the upward revision largely reflects
The agency said the upward revision largely reflects a statistical adjustment by the Central Bureau of Statistics, which now includes production activities carried out abroad by Israeli companies. The Bank of Israel’s forecasts, which exclude production abroad, stand at 3.4% growth in 2026 and 5.1% in 2027, broadly in line with Moody’s previous projections. The government deficit is now expected to reach 5% of GDP in 2026, down from Moody’s earlier forecast of 5.9%.
The debt-to-GDP ratio is projected to stand at 68.5%, compared with a previous estimate of 70.1%. Moody’s forecasts a deficit of 4.8% in 2027 and 4.3% in 2028. The assessment differs in emphasis from an analysis Fitch identified political deadlock and the reliance on a continuing budget as the main risks to the economy, warning that government paralysis could undermine fiscal management and forecasting that public debt would continue to rise
Moody’s, by contrast, devotes only a brief mention to the possibility of prolonged political paralysis, focusing much of its analysis on the strength of state institutions and Israel’s foreign relations. The message from Moody’s is that Israel’s credit standing will depend on more than its deficit and debt figures. The composition of the next government, and its approach to the judiciary and relations with the international community, could also play a significant role in shaping the country’s credit outlook.
