The Israeli newspaper Calcalist said that the impact of the arrest warrants issued by the International Criminal Court against Israeli Prime Minister Benjamin Netanyahu and former Defense Minister Yoav Galant extends to the entire Israeli economy, as they are a real danger to the stability of Israel’s economy and its position in the global financial arena.
The newspaper indicated in a report that it is not a coincidence that the credit rating agency Standard & Poor’s, in May 2024, considered the International Criminal Court’s legal action against Netanyahu earlier among the risks threatening Israel’s credit rating.
The newspaper pointed out that stability and confidence are essential matters, especially for a country whose exports constitute about 30% of the gross domestic product and 80% of its capital comes from abroad, noting that foreign investors and clients have the power to decide the fate of exports, investments, and the costs of financing the Israeli economy.
The biggest fear
Calcalist reported that the greatest fear is that the arrest orders will increase internal political and geopolitical instability, which will spill over into the economic system, cause an increase in bond yields, a decline in the value of the shekel, and damage capital markets.
She explained in her report that many international financial institutions, such as pension funds and sovereign wealth funds, buy Israeli government and private bonds, and that the decision to stigmatize Israel as committing a “war crime” does not encourage business and investment.
The rate of foreigners’ holdings of tradable government bonds of the State of Israel has decreased since October 7, 2023, from about 15% to the level of about 9% in recent months, and if the war and internal disturbances continue and the boycott in all its forms increases, there is a fear that foreign investors will continue to reduce their holdings and raise… The yield on bonds, according to the newspaper.
Calcalist adds that the debt-to-GDP ratio has already reached 70% compared to about 60% at the beginning of 2023, at a time when the Ministry of Finance desperately needs to finance the deficit and interest payments.
The newspaper pointed out that the war on Gaza and Lebanon added about 11 billion shekels ($3 billion) in interest payments on the debt, at a time when the global economy is facing inflationary pressures and high interest rates.
The Calcalist report considered that the greatest challenge that Israel currently faces is restoring international confidence, and said that “the loss of confidence by investors may require many years to rebuild it, and with the escalation of calls for an international boycott against Israel, the economic situation is becoming more fragile.”
