Fitch lowered Israel's rating to "A"; prognosis "negative"
The international rating agency Fitch Ratings has announced that it has lowered Israel's credit rating from "A+" to "A" with a negative outlook. This decision is due to the negative impact of the ongoing war in Gaza, increasing geopolitical risks and significant economic damage that threatens the stability of the country's finances.
According to Fitch, the protracted conflict in Gaza is putting serious pressure on Israel's public finances. According to the agency's forecasts, the budget deficit will be 7.8% of GDP in 2024, and the level of public debt will remain above 70% of GDP in the medium term. These figures are not only related to the high costs of military operations and displacement of affected areas, but also to economic damage to infrastructure and industrial activity. Fitch , also notes that according to the World Bank, governance indicators are expected to deteriorate, which may negatively affect the country's creditworthiness.
Fitch is concerned that the conflict will continue until 2025 , expand on other fronts, and lead to further increases in military spending and debt burdens. In addition to the human costs, the conflict could lead to infrastructure destruction and long-term economic consequences, including reduced investment and industrial activity, the agency warned .
Fitch predicts that the Israeli government will be forced to continue increasing military spending, which could include expanding conscription and increasing weapons production. These steps will likely result in additional costs and additional financial risks for the country.
Fitch notes that the downgrade decision reflects concerns about Israel's long-term economic stability amid ongoing conflict and geopolitical tensions. According to the agency, further deterioration of the situation could put additional pressure on the country's credit rating, especially if the war lasts longer than expected and leads to a further deterioration of the economic situation.
The conflict in the Middle East escalated in late July and early August after the deaths of several key figures, including Ismail Haniyeh, the commander of Lebanon's Hezbollah armed forces, Fouad Shukr, and the head of Hamas' military wing, Mohammed Deif. Israel has been blamed for their killings, raising tensions in the region and raising concerns among Muslim communities.
