Investors and analysts warn that the Israeli economy could witness a downturn in its credit rating, less foreign investment and a weaker performance in the technology sector if the turmoil caused by the government’s controversial judicial amendments persists.
On Monday, the Israeli government accelerated the passage of the first in a series of laws aimed at reducing the powers of the Israeli Supreme Court in favor of the executive branch of Prime Minister Benjamin Netanyahu.
The move sparked widespread protests, with many from doctors to tech company workers stopping work and taking to the streets to protest.
The shekel fell more than 2 percent against the dollar in the days after the protests, bringing its losses to more than 9 percent since plans for judicial reforms were first floated in January.
“The biggest concern for foreign investors watching the situation in Israel right now is uncertainty. There is no clear end point. And as long as this continues, there will be question marks regarding the Israeli economy.”
Declining growth?
The Israeli stock market is performing badly amid uncertainty, with the MSCI Israeli index lagging behind major global stock indices, such as the MSCI All Country World Index, by about 14 percent due to the reluctance of local investors. about trading in the market.
According to data from Copley Fund Research, foreign investment in Israeli stocks remained strong through the end of June due to its compelling economic image.
The percentage of global funds with exposure to the state reached 35.5 percent, the highest since 2017, while the number of funds with funds in Israel increased by 3.44 percent, the largest this year.
Kinnear added that relatively low inflation compared to similar countries had helped boost investment, but the growing turmoil could affect the liquidity coming into the country.
Morgan Stanley expected Israel’s gross domestic product to rise by about 2.5 percent this year and 3 percent next year, but warned of the possibility of these rates shrinking to 1.0 percent and 1.6 percent, respectively, in the absence of solutions to the unrest in the country.