S&P Global downgraded Israel’s rating on Thursday, warning that escalating tensions in the Middle East could affect its ability to repay its debt.
The rating agency lowered Israel’s sovereign credit rating from ‘AA-‘ to ‘A+’, while maintaining a negative overall outlook.
“The recent intensification of the confrontation with Iran increases the already high geopolitical risks for Israel. We hope that a broader regional conflict will be avoided, but the war between Israel and Hamas and the confrontation with Hezbollah appear likely to continue throughout 2024,” he said in a statement. .
S&P projects that Israel’s overall deficit will increase by about 4% to 8% by the end of this year, mainly due to increased defense spending. It predicts that net government debt will likely peak at 66% in 2026, and that any extension of the conflict in the Middle East could have even greater consequences for the country’s economy.
“A broader regional conflict, which is not our base case scenario, could have a material negative impact on Israel’s security situation and, consequently, its economic, fiscal and balance of payments parameters,” S&P said .
The downgrade – which puts Israel’s credit rating on par with countries including China, Bermuda and Kuwait – comes as senior US officials told several media outlets that Israel had hit Iran with day to day. Tel Aviv has not yet officially claimed responsibility for the attack.
Moody’s, another major credit rating agency, downgraded Israel’s rating for the first time in February, citing the impact the ongoing war in Gaza could have on the country’s finances.
The Israeli shekel fell 0.2% against the US dollar on Friday, as markets digested both the depreciation and the announced strike against Iran, according to Refinitiv data.
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