OpinionIsrael at War

Downgrading Israel’s credit rating is a mistake

We must ask if politics is influencing various agencies’ decisions to ignore Israel’s resilience.

Corner of Wall and Broad streets. Credit: Pixabay.
Corner of Wall and Broad streets. Credit: Pixabay.
Bob Rubin
Bob Rubin is the Founder and CEO of Rubin Wealth Advisors. He can be found at https://www.rubinwealthadvisors.com.

Less than two weeks after the Oct. 7 massacre of 1,400 Israelis, the world is predictably starting to turn on Israel, whether it’s at the United Nations, in the international media or now in the financial markets.

Last week, major rating agencies, including S&P Global Ratings, Fitch Ratings and Moody’s took the perplexing step of downgrading Israel’s credit outlook to “negative.” Their rationale? The anticipation of a war negatively impacting the country’s economy.

It is a grave mistake, however, to underestimate a nation armed with nuclear capabilities, one of the world’s most formidable armies and a highly advanced air force when it faces a barbaric Islamic terrorist organization.

The downgrades echo past rating agency errors and raises questions about the influence of politics on their decisions.

Israel is no stranger to adversity and its security situation has always been a challenging one. However, the idea that the country would be severely hindered by a terrorist organization is both misguided and underestimates the capabilities of the Israel Defense Forces (IDF). The downgrades appear to ignore the historical resilience and strength of Israel in the face of security threats.

Israel’s economic growth has, in large part, been driven by its thriving technology and innovation sector. The nation is a global technology powerhouse, often referred to as the “Startup Nation.” In my last op-ed in JNS, I wrote in detail about how Israel’s startup ecosystem continues to thrive and has always grown in the face of adversity.

The credit rating agencies’ past misjudgments, such as their failure to predict the severity of Greece’s financial crisis or the collapse of Lehman Brothers and near-collapse of AIG during the 2008 financial crisis, should give us pause. These errors had far-reaching consequences, underscoring the fallibility of rating agencies when it comes to assessing complex situations.

The timing of the downgrade also raises concerns about political influence. Historically, credit rating agencies have faced criticism for potential conflicts of interest and for being influenced by political considerations.

Amidst the uncertainty created by these downgrades, there’s an important point to consider: Israel may present an attractive investment opportunity. The resilience of its economy, its strong technology sector and its historical ability to overcome challenges suggest that it might be a prudent time to consider such investments.

The downgrades are questionable moves that warrant scrutiny from within and outside of Israel. Israel’s economic and military strengths should not be underestimated, and in my opinion, the credit rating agencies’ assessments should be taken with a grain of salt.

As history has shown, Israel has faced adversity before and emerged stronger. Its credit rating should reflect this reality rather than succumbing to unfounded pessimism. For investors, this could be an opportune time to explore the potential that Israel offers in terms of economic growth and innovation.

The opinions and facts presented in this article are those of the author, and neither JNS nor its partners assume any responsibility for them.
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