Israel’s Credit Rating Downgraded by Fitch
Fitch Ratings announced that it downgraded Israel’s credit rating from “A+” to “A” in its latest assessment. It was stated that the outlook was determined as negative after this downgrade. The ongoing war in Gaza, increasing geopolitical risks and the effects of Israel’s military operations on multiple fronts were cited as the reasons for the downgrade.
Fitch also noted that Israel’s public finances have taken a serious hit. The statement noted that Israel is expected to run a budget deficit equivalent to around 7.8% of its gross domestic product (GDP) this year, while the debt is projected to remain above 70% of GDP in the medium term.
It was emphasized that geopolitical risks support the negative outlook of Israel’s credit rating. It was stated that the conflict in Gaza could last until 2025 and that there is a risk of spreading to other fronts in the process. It was stated that this situation could lead to significant additional military expenditures, serious damage to infrastructure, and long-term losses in economic activity and investments, in addition to human losses. It was stated that all these factors could cause Israel’s credit metrics to deteriorate further.
It was also recalled that tensions between Israel and Iran and its allies remain high. It was noted that recent attacks increased the risk of an escalation that could further damage Israel’s credit profile. Fitch noted that the war is likely to last until the end of 2024 and that there is a possibility of continued intensive military operations. This means that high spending for urgent military needs will continue and that disruptions in manufacturing, tourism and construction sectors in border regions may occur.
Finally, Fitch noted that any prolongation or escalation of conflicts could have significant and long-term negative effects on the economy and public finances, which could lead to a rating downgrade.
