Prime Minister Benjamin Netanyahu said Israel's economy was strong and will continue to grow amid a damning report by credit agency Moody's on Tuesday that sounded the alarm over the partial enactment of the contested judicial legislation by his Coalition government.
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In a joint statement with Finance Minister Bezalel Smotrich, Netanyahu said: "This is just a momentary reaction, when the dust settles it will become clear that Israel's economy is very strong."
Video: Riots on the Ayalon Highway following the passage of the judicial reform bill / Avi Cohen
Moody's said in a report on Israel that the key bill that passed on Monday – which limits the courts' ability to strike government decisions they deem unreasonable – signalled political tensions will continue and will likely have negative consequences for Israel's economy and security situation.
Moody's Investors Service said that there was "significant risk" of turbulence in Israel following the passage of the first law in the judicial reform package and that could lead to "negative consequences for Israel's economy and security situation."
"Attempts to reach a compromise with the opposition have failed… the bill's approval comes amid widespread protests by civil society groups that have been ongoing since January and which we expect will continue," Moody's said.
"Petitions against the bill have been lodged with the Supreme Court, raising the risk of a constitutional crisis between the executive and judiciary," it added.
Likewise, Morgan Stanley cut Israel's sovereign credit to a "dislike stance" on Tuesday.
"The recent events point to continued uncertainty and thus the potential for an increased risk premium that would lead to weakening FX and higher borrowing costs," Morgan Stanley said.
"Such economic shocks tend to lead to weaker GDP growth due to lower business investment and private consumption growth."
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