Fitch Ratings downgraded Israel’s credit rating from “A+” to “A” with a negative outlook due to concerns surrounding the ongoing war with Hamas and geopolitical risks. The agency warned that the conflict in Gaza could continue for years, causing significant financial damage and impacting credit metrics. Israeli military actions in Gaza have resulted in tens of thousands of Palestinian casualties and human losses, along with economic disruptions and infrastructure damage. Ceasefire negotiations are ongoing, but violence continues to escalate, leading to further casualties and destruction.
The downgrade in credit rating could make it more difficult and expensive for Israel to borrow money. The country’s budget deficit is expected to reach 7.8% of its GDP in 2024, driven by military operations, economic disruptions, and potential conflicts with groups like Hezbollah. Fitch also predicts that Israel’s debt-to-GDP ratio will remain above 70% into 2025, significantly higher than the median A rating ratio of 55%. The agency suggested that de-escalation of the conflict and fiscal reforms could help Israel improve its credit rating in the future.
Moody’s Investors Service also downgraded Israel’s credit rating from A1 to A2 in February, citing similar concerns about the ongoing military conflict with Hamas and its impact on the country’s political stability and fiscal strength. This downgrade, while still within the investment grade, reflects the heightened risks and challenges Israel faces in the current geopolitical landscape. The Israeli government has not yet provided a comment on the credit rating downgrades, and the situation continues to unfold.
The ongoing conflict in Gaza has led to significant human and economic losses for Israel, with fears of further escalation and ramifications on the country’s credit standing. The international community, including the US, has been providing military aid to Israel in light of the situation, further complicating the economic outlook for the country. As negotiations to end the conflict continue, the financial toll of the war and its impact on Israel’s economic stability remain key concerns for credit rating agencies like Fitch and Moody’s.
In conclusion, the downgrade of Israel’s credit rating by Fitch and Moody’s reflects the challenges and risks the country faces due to the ongoing war with Hamas and wider geopolitical uncertainties. The impact of the conflict on Israel’s financial health, debt levels, and budget deficits is a cause for concern, with potential long-term consequences for the country’s credit metrics. Efforts to de-escalate the conflict, implement fiscal reforms, and address the underlying economic challenges will be crucial in ensuring Israel’s credit rating stabilizes and improves in the future.
