Tel Aviv, August 13 – Rating agency Fitch downgraded Israel’s credit rating from A+ to A on Tuesday, citing worsening geopolitical risks due to the ongoing war in Gaza. The agency maintained a negative outlook, indicating the possibility of further downgrades. This report comes from the business portal businesstimes.
Fitch stated that the conflict in Gaza could “extend well into 2025 and there is a risk that it could spread to other fronts.” This is likely to result in a significant increase in military spending, destruction of infrastructure, and more lasting damage to economic activity and investment, further worsening the country’s credit parameters.
The rating agency expects the Israeli government to permanently increase military spending by nearly 1.5% of gross domestic product (GDP) compared to pre-war levels, as it strengthens border defenses. As a result, Israel’s budget deficit is expected to reach 7.8% of GDP in 2024, up from 4.1% of GDP in 2023. Debt levels are expected to remain above 70% of GDP in the medium term.
Fitch added that the budget deficit could deepen if the war continues into 2025.
Meanwhile, Standard & Poor’s has kept Israel’s credit rating at A+ with a negative outlook, and Moody’s currently rates Israel at A2 with a negative outlook.
