The rating index of the international rating agency Moody's

"The international rating agency downgraded Israel's rating for the second time, and exceptionally by two notches, from A2 to Baa1 with a negative outlook"

What is the rating index of the international rating agency Moody's?

And why is its downgrade a challenge for our economy and how much will it cost us?

The purpose of the index is a credit rating of the country's ability to repay its financial obligations such as loans and bonds.

Country ratings are issued in ranges starting from the highest rating (AAA) down to lower ratings (such as C or D).

A high rating indicates a lower risk of debt repayment, while a low rating indicates a higher risk, which raises that country's borrowing costs.

How the rating is calculated:

It is important to note that the rating is based on several economic and financial metrics:

• Debt-to-GDP ratio

  The ratio between the country's debt and its gross domestic product. A high ratio

  indicates a lower ability to repay debts.

• Budget deficit

  The difference between the state's expenditures and its revenues.

• Economic growth

The GDP growth rate.

• Fiscal and monetary policy

Sound management of economic policy by the government and the central bank.

• Political stability

The meaning of Israel's downgrade -

Israel's current rating after the downgrade (Baa1) indicates that Israel is at investment grade, but still with a higher-than-usual risk of debt repayment, especially because of the complex security and economic situation.

Possible effects -

Financing costs, harm to foreign investment, harm to the strength of the shekel, harm to trade terms with international parties (insurance, agreement terms, etc.)

Examples of countries and ratings:

• High rating (AAA): countries such as Germany, Switzerland, Canada and Australia are rated AAA because of a stable economy, balanced financial management and relatively low public debt.

• A rating like Israel's now (Baa1): countries such as India, Brazil and Hungary have similar ratings because of various economic and political risks that lead to uncertainty about their ability to repay debt.

An example for illustration:

For understanding and demonstration, the debt ratio of the State of Israel for 2923 stood at about 62% about $310 billion.

A downgrade can raise financing costs to compensate for the increased risk. If, for example, the interest rate rises by 0.5% following a downgrade, debt of $310 billion would grow by about $1.5 billion a year.

The meaning for us: in order to meet the state's obligations, this will usually lead to higher tax payments to meet the commitment, cuts to public services, and harm to government investment in projects.

We wish ourselves and our country quiet days, growth, insights and personal and social growth for the new year

And that we become AAA soon!

https://www.ynet.co.il/economy/article/cjiy73mpx

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