Israel's judicial reform turmoil threatens economic growth, investment
By Libby George and Marc Jones
LONDON (Reuters) -Israel's economy may face ratings downgrades, falling foreign investment and a weaker tech sector if turmoil arising from the government's contentious judicial reforms continues, investors and analysts warn.
The government rammed through the first of a series of laws on Monday aimed at neutering the powers of Israel's Supreme Court in favour of Prime Minister Benjamin Netanyahu's executive branch.
The move sparked widespread protests, with workers from doctors to tech firms downing tools and taking to the streets. The shekel currency has fallen more than 2% versus the dollar in the days since, taking its decline since the plans first emerged in January to more than 9%.
«The main issue for external investors looking at Israel at the moment is just the uncertainty,» said Hamish Kinnear, senior Middle East and North Africa analyst at Verisk (NASDAQ:VRSK) Maplecroft. «There is no clear endpoint. While that remains the case, this is going to be a question mark hanging over Israel's economy.»
GROWTH TORPEDO?
Israel's stock market has also badly underperformed amidst the uncertainty, with MSCI's Israel index lagging the main global stock indices, such the MSCI All Country World, by around 14% as domestic investors shunned the market.
Up until the end of June, however, foreign investment into Israeli equities had remained strong due to its compelling economic picture, according to data from Copley Fund Research.
The percentage of global funds with exposure to the country stood at 35.5%, the highest since 2017, while Israel saw the largest increase in new ownership of any country this year, with a 3.44% gain in the number of funds with money in the country.
Maplecroft's Kinnear
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