CNN
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Israel’s credit rating was downgraded by Fitch Ratings on Monday after the agency raised concerns about the ongoing war with Hamas and geopolitical risks.
Fitch maintained its negative outlook on the country’s creditworthiness and downgraded the rating again going forward. The rating agency downgraded the country’s creditworthiness to “A” from “A+”.
The downgrade underscores the financial consequences of the war, which has also cost tens of thousands of lives and shaken the region and the world. Analysts at Fitch said the “conflict in Gaza could last well into 2025” and there is a risk of the conflict escalating.
“The downgrade to ‘A’ reflects the impact of the ongoing war in Gaza, heightened geopolitical risks and military operations on multiple fronts,” Fitch said in a statement.
“In addition to the loss of life, this could lead to significant additional military spending, destruction of infrastructure and more lasting damage to economic activity and investment, leading to a further deterioration in Israel’s creditworthiness.”
A downgrade of a country’s credit rating could make it harder to borrow money. A rating of “A” is still considered investment grade, or among the safer groups of debtor companies.
The agency forecasts that Israel’s budget deficit will reach 7.8 percent of GDP in 2024, compared to 4.1 percent in 2023.
The central government’s budget deficit is due to military operations, mitigating economic disruptions and also the cost of relocating the northern part of Israel, given the possibility of another front with the Lebanese militant Hezbollah group in the coming weeks.
Fitch also expects Israel’s debt-to-GDP ratio to exceed 70 percent by 2025, while the average A-rating ratio is 55 percent.
Fitch said a de-escalation of the conflict and fiscal reforms that reduce the debt ratio could help the country improve its rating again.
Moody’s Investor Service downgraded Israel’s credit rating from A1 to A2 in February. The main reason for the decision was the “assessment that the ongoing military conflict with Hamas, its consequences and further implications significantly increase the political risk for Israel and weaken its executive and legislative branches as well as its financial strength for the foreseeable future,” Moody’s said.
CNN’s Samantha Delouya contributed reporting.
This is a developing story and will be updated.
